Warwick Business School has recently confirmed that women investors outperform their male counterparts, and by no less than 1,8 % per annum on average. Over 30 years, that’s double your money!
The wealth is growing
Women now control a third of the world’s wealth, according to the Boston Consulting Group (2020), and are growing this at a faster rate than ever ($5 trillion per annum). They estimate that these investments will reach $80−90 trillion by 2023! Credit Suisse in 2018 estimated that including non-financial assets, women controlled 40% of the world’s wealth.
Women are increasingly active in obtaining a better education and qualifications, in pursuing a meaningful career, and today, especially as entrepreneurs. Gender pay gaps are closing and the value of gender diversity is increasingly recognised – Harvard research showed that women on the board can increase company profits by over 50%. Women today are technology savvy and financially literate. As more women head the household and are often single parents too, they are taking more responsibility for financial planning and financial independence.
Compound an outperformance of 1,8% per annum on that wealth base and the gains are staggering. Then add to the investment pool at a faster rate, and there can be no doubt that women investors are leading the charge.
But while women tend to save more as a percentage of their salaries than men, in absolute terms their investments are smaller as they tend to pay a disproportionate contribution to household and children, will take breaks for pregnancy or revise their careers to raise children, and often retire earlier but live longer. Sadly, US research (CNBC) shows 19% of the women in the US retire with no savings.
And dare I say it, for many years finances and investments were better dealt with by men. Or so men thought. So, women were arguably more conscientious but less confident about investing. But times are changing.
Women are better investors
Women see money as a means to an end. They have clearer objectives. They invest with a purpose for an end goal or life events. They tend to invest for the long term. Men tend to focus on ‘stock picking’ and seek speculative opportunities.
Women like facts rather than just gut instinct and are more likely to research the investment than speculate. Often that is seen as being risk-averse, but on the contrary … Their risk management is arguably better. They diversify more than men, who enjoy the thrill of betting on a few winners. Women trade less − half of what men trade – and we know that trying to time the market is generally punitive.
Women are more environmentally, socially and governance conscious (ESG) in investing (64% factor this in). ESG investing is earning premiums. Men favour pure performance (94%).
- Take control of your finances – ‘a man is not a financial plan’.
- Don’t underestimate your skills – research shows that you’re more capable than you may have thought.
- Improve your financial literacy – there is a wealth of literature, tools and seminars out there.
- Get sound financial advice − don’t be scared to choose your advisor carefully, and ask the tough questions.
- Stay with your goals.
- Play to your strengths, especially your better investment behaviours.