FEA­TURE

Women and in­vest­ing

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Lack of con­fi­dence may be hold­ing many women back when it comes to in­vest­ing – that’s de­spite the fact that they may be nat­u­rally more suited to it than men.

While women are more likely to be in charge of the house­hold fi­nances, when it comes to in­vest­ing they are still far less en­gaged than men.

The num­ber of fe­male in­vestors is cer­tainly grow­ing – women opened some 892,000 stocks and shares ISA ac­counts in the last tax year, ac­cord­ing to the most re­cent fig­ures from the Of­fice for Na­tional Statistics. But that’s still far fewer than 1.1m in­vest­ment ac­counts opened by men in the same pe­riod.

A nat­u­ral aver­sion to risk means women are far more likely to keep their money in cash – that much is clear from the ONS fig­ures, which show women opened 5.2m cash ISA ac­counts last year, com­pared to 4.4m opened by men.

BUY AND HOLD

Just 23% of fe­male adults in the UK hold an in­vest­ment prod­uct, com­pared with 35% of men. It’s a pat­tern which is also ev­i­dent among pro­fes­sion­als too – just one in 10 funds of the 2,500 or so prod­ucts avail­able to UK in­vestors are run by a fe­male man­ager.

Tracey Browne, wealth man­age­ment con­sul­tant at Sal­is­bury House Wealth, says: ‘It’s great to see a grow­ing num­ber of women us­ing ISAs, but it is im­por­tant they adopt the right in­vest­ment strat­egy for the long term to start clos­ing the wealth gap. While sav­ing in cash is of­ten seen as the safe op­tion, it’s not the best for long-term sav­ings growth.’

In­deed, nat­u­ral char­ac­ter traits may ac­tu­ally mean women are bet­ter in­vestors when they do make the leap. For ex­am­ple, 12% of women only check on their in­vest­ments once a year, com­pared with 14% of men who check once a month and 10% who check once a week.

That im­plies women don’t tend to tin­ker with their port­fo­lios as much, which gives them the ben­e­fits of buy and hold in­vest­ing: they don’t rack up trad­ing costs, don’t get dis­tracted by short term mar­ket move­ments, and so aren’t tempted to sell at the bot­tom of the mar­ket and buy at the top.

RISK FO­CUS

Holly Mackay, founder of in­de­pen­dent ad­vice site Bor­ing Money, says: ‘From my ex­pe­ri­ence, women are more likely to fo­cus on risk and as­so­ciate

WOMEN WANT TO FULLY UN­DER­STAND WHAT THE RISKS ARE, HOW AN IN­VEST­MENT WORKS, WHERE THEIR MONEY IS BE­ING IN­VESTED AND TO GET DE­TAILED EX­PLA­NA­TIONS OF CHARGES

in­vest­ing with gam­bling. Data con­firms that women typ­i­cally feel less con­fi­dent than men when it comes to in­vest­ing even though their knowl­edge lev­els are sim­i­lar.

‘I don’t think women or men are the bet­ter in­vestor, but I do think that dif­fer­ent pat­terns of be­hav­iour and dif­fer­ent self-di­ag­no­sis about in­vest­ing skill can lead to bet­ter out­comes for fe­male in­vestors.’

But there could be draw­backs too; while women’s slow and steady ap­proach makes them great buy and hold in­vestors, it can mean they miss out on op­por­tu­ni­ties while they are com­ing to a de­ci­sion.

Men are also typ­i­cally more likely to con­sider di­ver­si­fi­ca­tion when mak­ing their in­vest­ment de­ci­sions and tend to spread their port­fo­lio across dif­fer­ent as­sets, sec­tors and re­gions. That could mean their port­fo­lios are bet­ter pro­tected than women’s in the event of a mar­ket fall.

A FULLER UN­DER­STAND­ING

Claire Walsh, per­sonal fi­nance di­rec­tor at Schroders, says: ‘I don’t think it’s that women are nec­es­sar­ily averse to in­vest­ment risk com­pared with men, it’s more than women want to fully un­der­stand what the risks are, how an in­vest­ment works, where their money is be­ing in­vested and to get de­tailed ex­pla­na­tions of charges, whereas men tend to gather the top-level in­for­ma­tion and then make a de­ci­sion more quickly.’

She says women may miss out on in­vest­ment op­por­tu­ni­ties be­cause they take longer to make a de­ci­sion and could, for ex­am­ple, lose out on valu­able em­ployer pen­sion con­tri­bu­tions in the mean­time. Women are also more likely to put the needs of their fam­ily be­fore their own, sav­ing their money into a child’s Ju­nior ISA rather than into an ac­count of their own, for ex­am­ple.

In terms of the funds men and women are drawn to, it is dif­fi­cult to as­cer­tain ma­te­rial dif­fer­ences, how­ever some ex­perts ar­gue that eth­i­cal and sus­tain­able as­pects seem to be more im­por­tant to fe­male in­vestors.

Re­search from Tri­o­dos Bank re­veals 58% of women would like their in­vest­ments to sup­port com­pa­nies that con­trib­ute to mak­ing a more pos­i­tive so­ci­ety and sus­tain­able en­vi­ron­ment, while 57% would move their in­vest­ments if they dis­cov­ered their money was be­ing in­vested in com­pa­nies caus­ing so­cial or en­vi­ron­men­tal dam­age.

Mean­while, some 64% of women told Bor­ing Money they would likely black­list cer­tain sec­tors such as weapons pro­duc­tion from their in­vest­ments, com­pared to just 48% of men. Adam Rob­bins, in­vestor re­la­tions man­ager at Tri­o­dos Bank UK, says: ‘There is clear de­mand among women for in­vest­ments which not only make fi­nan­cial sense but which also ben­e­fit the world around them. Fe­male in­vestors look set to be a driv­ing force for the fu­ture growth of the eth­i­cal in­vest­ments mar­ket, as they in­creas­ingly recog­nise the power of money to be a pow­er­ful tool for change.’

Laura Suter, per­sonal fi­nance an­a­lyst at in­vest­ment plat­form AJ Bell, notes there is a ‘dou­ble whammy’ at work in that women are nei­ther sav­ing nor in­vest­ing enough of their money to achieve higher re­turns. Given their longer life ex­pectancy, the smaller im­plied pen­sion pot is in Suter’s words ‘wor­ry­ing’. She adds: ‘In­vest­ing can seem daunt­ing for first timers, par­tic­u­larly with the amount of com­pli­cated terms and the over­rid­ing fear of los­ing your money. I think there is a large onus on the fi­nan­cial in­dus­try to make in­vest­ing more ap­proach­able for ev­ery­one, par­tic­u­larly women, and to cut through the waf­fle and baf­fling jar­gon to make it eas­ier for ev­ery­one to in­vest their money.’ (HB)

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