Why we should all be listening to female investors

Andrew Dines, director and chartered financial planner at AAB Wealth, explains why ignoring female investors is the wrong move.

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Finance and investing still has something of an image problem.

All too often, it’s seen as being largely for those who are ‘male, pale and stale’.

Women make up a much smaller proportion of investors, and there’s concern for those who have fallen into the ‘gender investment gap’.

Women aged between 21 and 53 are thought to have half the amount set aside of men in the same age group, for example.

However, change is coming.

Research has shown that since the pandemic, women are changing their approach to investing.

They’re also getting wealthier – women are expected to control 60 per cent of the UK’s wealth by 2025.

This makes it more important than ever to pay attention to this under-served group of investors.

Do women and men invest differently?

Men are seen as the big risk takers, more likely to look for investments that promise big returns (but also carry greater uncertainty).

Women, on the other hand, are more likely to opt for the safer option.

Lower returns but more chance of a positive outcome.

Of course, in practice, it isn’t always this clear cut.

But according to Fidelity International’s Global Women and Money Survey, women are more likely to describe themselves as cautious investors, and less likely than men to describe themselves as confident or ambitious.

Can being more risk-averse impact returns?

Research from Hargreaves Lansdown showed women are more likely to keep their money in cash rather than investing in stocks and shares.

This might seem like the safer option, but also puts returns at risk of being eroded by inflation.

Patience, not panic

Caution can also be a good thing. Too much confidence (over-estimating your abilities and ignoring risk factors) might harm your investments.

Some studies highlighted men’s tendency towards overconfidence.

For example, one research paper found that overconfidence in men led to ‘overtrading’ – buying and selling too frequently on investment accounts.

This cost their net returns by about 2.65 per cent per year.

Similarly, studies have shown women to be more patient investors – less prone to panic in tough time – a tendency that’s generally more suited to long-term investing.

Figures from Boring Money suggesting women hold funds for 10.7 years on average, compared with 8.3 years for a man.

Patient investing is particularly relevant when it comes to turbulent periods in markets.
When stock prices fall quickly, we often see panic-selling from investors, but this can be the more damaging in the long run.

Downturns are only temporary, so staying calm (and invested) tends to be better for long-term returns.

Values are important

One especially interesting way in which women appear to differ is a marked interest in sustainability.

Research shows that decision-making for women investors young and old isn’t just influenced by how big the final investment pot is.

They’re more likely to take into account the world around them and want their portfolios to include environmental, social and governance (ESG) factors.

A UBS Sentiment Survey found seven out of 10 women investors said they took sustainability into account (compared with 58 per cent of men).

This makes women an incredibly influential socially conscious group of investors for the future.

Paying attention

Undervaluing women’s voices in investing is a big mistake.

As financial planners, we have a responsibility to all our clients to help them make informed decisions.

At AAB Wealth we make sure the advice we give and the products we discuss with you are tailored to your own personal circumstances, approach and goals.