ASA Director Lel Smits sheds light on women’s investment trends in Australia.
Australian women have broken barriers by venturing into investment avenues, beyond their primary residence and superannuation, in greater numbers than ever before. Despite men continuing to dominate the investor landscape, half of the new 1.2 million investors entering the market since 2020 were women. Encouragingly, the percentage of next-generation female investors also witnessed a positive shift to 11% in 2023, showing more women are heading to the stock market.
“While it’s pleasing to see this progress, there are still gaps that need to be addressed,” says Lel Smits, Australian Shareholder’s Association Director. “We need to work towards narrowing the disparities and empowering more women to participate in investment opportunities.”
These views are echoed by the ASX’s first female Managing Director and CEO Helen Lofthouse who says, “As the number of new investors continues to grow year on year, it’s important for investors to have education resources available to assist in their investment journey”.
Portfolio disparities and contributing factors
Despite women’s growing presence in the investment landscape, male investors still maintain larger average portfolios, with $667,000 compared to $413,000 for women. Furthermore, 31% of female investors have balances below $50,000, compared to 21% of their male counterparts. The drivers behind investment inequality are multifaceted, with factors such as income levels and the variety of investments held playing a role.
“One contributing factor to the asset gap may be the difference in income levels,” notes Smits. Commenting on the ASX’s report Smits also highlights, “Women tend to hold a smaller number of investment products, averaging two, compared to men who typically hold three.”
Asset allocation disparity: Exploring the factors
A disparity in asset allocation between male and female investors emerges as a contributing factor to the overall investment landscape. Male investors tend to hold higher levels of growth assets, such as Australian shares, international shares, and ETFs, compared to their female counterparts. This difference in investment exposure may limit the diversification opportunities available to female investors. However, it is worth noting that women surpass male investors in terms of holding term deposits, which provide lower risk but correspondingly lower returns.
Smits emphasises, “Creating a more inclusive investment landscape requires addressing the asset allocation disparity. By equipping women with knowledge and tools to diversify their investment portfolios, we can foster greater gender parity in the investment arena.”
Risk preferences and reactions to market volatility: Gender differences
According to the ASX report, women generally display a higher inclination towards risk aversion in their investment approach.
Lel affirms this by stating, “The ASX survey found that women generally exhibit a greater inclination towards risk aversion when it comes to investing and tend to prefer more stable and reliable returns over moderate or higher risk investments. This in contrast to a larger proportion of men who are open to taking on greater investment risks.”
This divergence in risk preferences between genders is further reflected in their reactions to market volatility. The ASX report highlighted, when faced with a scenario of rapid portfolio decline, female investors tend to express concern but are more likely to wait for improvements.
Challenges faced by female investors: Trust and knowledge gaps
Trust and knowledge play crucial roles as challenges faced by female investors. Women often find it challenging to determine which information sources to trust, identify providers who act in their best interests, and select suitable investments, according to ASX.
This trust deficit is particularly evident in their perceptions of financial institutions, with women exhibiting slightly less trust overall, except when it comes to financial planners and advisors. ASX also has shown that diversification, a key aspect of investment strategies, also poses a challenge for both genders with a notable proportion of women finding it daunting.
“The challenges faced by women in trusting the investment process may stem from a combination of historical biases, limited access to resources, risk aversion, and the complexities of the investment industry,” says Smits.
Smits believes, “Overcoming these challenges must be addressed by providing women with inclusive financial education, fostering transparency and diversity within the industry, and empowering them to make informed decisions based on their individual financial goals and risk tolerance.”
Barriers to entry for non-investors: Affordability and wage gap considerations
Surprisingly, a majority (64%) of Australians who have never invested before are female. Affordability emerges as a key barrier, with a higher number of women citing financial constraints as the reason for not investing. This discrepancy can be attributed to the significant wage gap prevalent in society, where women earn less than their male counterparts. The wage disparity limits the financial resources available to women, making investment opportunities less accessible.
Smits says, “To achieve true gender parity it is crucial to address the remaining disparities and provide women with the necessary resources, education, and support to engage confidently in the investment landscape. By bridging these gaps, we can create a more inclusive and promising future for investing in Australia.”