On International Women’s Day 2019, here are a few tips to help get more women investing.
Millennial women today have far more financial independence than previous generations ever had. It's a little-known fact that we're in the midst of a global $22 trillion shift of wealth to women by 2020, with nine out of 10 women expected to be the sole financial decision-maker in their household during their lifetime.
Despite research showing that millennial women tend to be better at budgeting and paying their bills on time than men, women still lag behind when it comes to investing and saving for retirement.
With only 53% of millennial women saving for retirement compared with 71% of millennial men, there is a ticking time bomb for female savers. So why, if we know we're good decision-makers when it comes to money, do we still invest less?
Why we don’t invest enough...
Many millennial women do not invest due to a lack of knowledge around how to get started. A 2018 survey by Wealthsimple found that 26% of women weren't investing because they didn't know where to start or how to choose the right company to invest with.
Additionally, almost half of the women surveyed didn't believe that they had enough money to start investing. It also doesn't help that on average, men speak more openly about money with their friends - everything from discussing their salary, to their bonus, to where they hold their investments.
Women are much less likely to discuss the topic, with research from Kantar TNS revealing that only 26% of millennial women think of themselves as having a high level of financial engagement, compared with 55% of men.
But when we do invest, we're better at it
Historically, women have tended to invest less and invested later. In the UK, according to figures from Boring Money, only 13% of women have a Stocks and Shares Isa compared with 21% of men.
Of these women who have an Isa, the average woman's balance is £22,907 compared to £35,616 for men. While men are investing more of their money, women tend to keep it in cash, which means they are often missing out on opportunities to grow their wealth in the long term, furthering the wealth gap. The good news? In the last couple of years research has shown that when women do invest, they tend to be better at it.
According to a study by Warwick Business School, women on average make an annual gain of 1.94% better than the FTSE100 index, compared to men at just 0.14%. Fidelity Investments also found that women on average earn 0.4% higher returns than men. This may seem like a small amount, but if women begin investing early on in life these earnings can add up to thousands of pounds over time. It's suggested through the research that women may be better investors because they tend to take on risk they are comfortable with, have a strong understanding of their financial goals and will not make rash decisions based on market ups and downs.
In comparison, men tend to be more willing to take on risk with the hope of higher returns over the short term. Being hyper-focused on beating the market can lead to emotional reactions when faced with market volatility, and drowning out the noise of the markets is one of the key traits of a smart investor.
How can we change?
Everybody has some reason for not investing in their financial future. It's complicated. It's a boys' club. You have to be rich to get started. Many of those reasons are valid, because up until this point, many of them unfortunately have been true. Thankfully, the times are finally changing with a host of new technology-driven players focused on helping people get started with investing, even with as little as £1.
According to a report by Merrill Lynch, 41% of women say their biggest financial regret is not investing more. That’s why increased education around the benefits of investing and how to get started, as well as a more open dialogue around money, is crucial for helping both women and men build a financially secure future.
Here are a few top tips to help get more of us invested:
Don't let language be a barrier
The investment industry is notorious for using complicated, with jargon-y words that rarely resonate with anyone who doesn't have a double degree in finance. The new generation of robo-advisers have started to tackle this issue by introducing simpler language, but there is still work to be done.
If you're starting out for the first time and need an extra helping hand, check out financial website Boring Money who help break down investing terms or Money to the Masses for comparisons of providers and account types.
Keep costs low
In the UK, the average investor pays 2.6% in fees for investment advice and management. This may not seem like a huge amount in the short term, but over time these fees could be costing you tens of thousands of your hard-earned savings.
Do your research and make sure you are choosing a provider that displays all the fees upfront. A good rule of thumb is you should never be paying more than 1% of what you are investing in a fee.
Money Observer’s guides to platform charges for different sizes of investment are a useful place to start.
- Here is how to find the best value broker for your Isa portfolio
Set it and forget it
This rule applies to all of your finances. The most successful way to remove your emotions from your money is to automate your finances.
A direct debit from your pay cheque into a savings or investment account is a great way to trick yourself into saving more money, and when it comes to investing will mean you are less likely to react out of fear (or elation!) when faced with market volatility.
Invest in your values
Research has shown that women are more likely to invest in line with their values, goals and priorities. Set aside time to think about what you are working towards (starting your own business, buying a home, saving for retirement) and at what stage of your life you are hoping to achieve these goals.
For people who want to make sure their money is aligned with their values, a socially responsible investing portfolio allows you to invest in companies that are prioritising initiatives like green technology or ensuring fair labour practises.
Meet with a financial adviser
As daunting as it might seem to discuss your financial situation with a complete stranger, speaking to an expert can be a great way to conquer your fears around investing. An adviser can help you set goals and build an investment plan that is tailored towards meeting your long-term plans.
At Wealthsimple, we offer all our clients access to a qualified investment adviser whether they have £1 or £1 million invested with us.
And lastly, it's not about money – it's about your life. Investing is one way to help you build the life you want to live, and there's no better time than today to get started.
Michelle Keller-Hobson, head of client success at Wealthsimple UK.