Kylie Purcell, the Investments Editor at Finder, explains why don’t more women invest?
Did you know that in the UK more investment funds are managed by people called Dave than by women?
While it’s not everybody’s dream to be a fund manager, that trend resonates through to almost every aspect of investing, from superannuation to share trading. Men dominate both financially and in participation numbers.
But here’s the bit that men don’t always dominate in – the art of investing.
Though just 18% of online investors in Australia are women (according to a recent Investment Trends report), numerous studies show that women generally outperform men when it comes to share trading.
That’s right, they may not be as noisy about it, but they pick good quality stocks and they tend to make smarter investment decisions.
In one famous UNSW study looking at Finnish share traders over a period of 17 years, women were found to have superior trading intuition, were better at reading share price patterns and made more money on average from stocks than their male counterparts.
So what’s stopping us?
Unfortunately, it comes down to the same factors we see in all aspects of money making. And it’s the same reasons girls tend to dominate at school but still end up with lower salaries on average in the workforce.
While it’s a lot more complex than simply blaming the pay gap, the truth is:
- The investment world is both male-dominated and overwhelmingly tailored towards men, from conferences to the way investment information is provided and even graphic design elements on webpages.
- Women are still earning less than men on average – Australian women’s average remuneration is 21% less than men’s and Finder research shows nearly 80% of women are stressed about their finances.
- Studies have also found women tend to prioritise their families more over work than men. That means that females typically have less savings to put towards investing and they’re also less able or willing to take risks with their money.
For many women raising families – some who will have taken time off from work to do so – investing in stocks will seem like too big a risk to take and too time-consuming to get involved in.
This isn’t irrational thinking. But thing is, while the stock market can be risky, history has proven it to be one of the best investments you can make (just ask your superfund provider) over a long time frame.
How to get started investing
Once upon a time, if you wanted to invest in the share market you needed to call your stock broker and place a trade. Brokerage fees were upwards of $100 and there was normally a minimum investment of several thousand dollars per trade.
This meant that share trading was mostly inaccessible to everyday Australians a couple of decades ago.
Thankfully, these days you have the option of using an online share trading app with brokerage fees typically starting from around $10–$30 a trade with a minimum investment of just a few hundred dollars or less.
With share trading platforms you can start buying shares with the click of a button. If you get started early you have the opportunity to build yourself a nice stock portfolio for that (fingers crossed) early retirement.
Here are a few tips:
- Have a plan of attack. As clichéd as it sounds, it’s important to have a strategy with a few goals in mind before you start buying shares. Ask yourself: how long can you afford to have your money sitting in stocks? How much can you afford to lose and what’s your plan if share prices drop? What about if they skyrocket?
- Think long term. It’s easy to lose money by regularly trading shares. Instead, consider investing in good quality blue chip companies or exchange traded index funds (ETFs) to hold on to for years or even decades. Studies have shown that you’re more likely to profit by sticking to a long-term investment plan, rather than by trying to time the market buying and selling stocks day to day.
- Research companies. Regardless of your approach, you’ll want to do a fair bit of research into a company before you invest in it. Take notice of company announcements, profit results, debt levels, whether it pays a dividend and other signs that show it’s continuing to grow.
- Learn the ropes. There are plenty of online talks and resources aimed at beginners. Lockdown is the perfect time to pick up some extra knowledge.
- Choose the right broker. You still have the option of using a full-service stock broker if you choose (where you call your broker to make trades), but the cheaper option is to buy shares yourself via an online share trading platform. Make sure you compare platforms across the market and look at broker fees, which markets are available (e.g. Australia, US etc) and what kinds of features the platform offers.
- Consider the risks. It’s important to be aware that share prices fluctuate and you’re at risk of losing some or all of your investment if a company goes bust.
Don’t be afraid to make mistakes
At the risk of stereotyping, I believe one of the main reasons very few women invest is because they’re more wary about making mistakes.
I spoke recently to NAB’s director of investor behaviour Gemma Dale about men’s and women’s investment habits on the nabtrade share trading platform.
She said that although there are still far fewer female investors than male, young women aged between 18 and 25 tend to have bigger investment portfolios than men of the same age group because they invest for the long term and are less likely to lose money through poor trading decisions.
Meanwhile, their male counterparts make a lot of mistakes, tend to make riskier moves and often end up losing more times than they profit.
This awesome ability to make sensible trading decisions is why women are so great at investing, but I think that drive to get it right all the time is also partly the reason so few women are getting into it.
According to Dale, by the time men and women reach their 30s, men start to outpace women in terms of portfolio size as they begin learning from their mistakes and make smarter decisions themselves.
The lesson being that investing isn’t necessarily about being the most skilled, it’s about being in it in the first place.
Kylie Purcell is the Investments Editor at Finder