What we know about how women invest

When most people think of the typical investor, it’s likely that a middle aged, wealthy man comes to mind, a ‘Warren Buffett in his hey-day’ type. And frankly, as it has been reported, that has been the case for many years. However, according to the latest ASX Investor Study, this may be changing.

What we learned from the ASX Investor study

One of the biggest trends that came out of the 2020 ASX Investor Study was the influx of women entering the market. According to the study, 45% of those who began investing in the past year were women, up from 31% who started investing five to 10 years ago. This trend is set to continue with women making up 51% of those who intend to invest in the future.

What does the typical female investor look like?

The survey explored several aspects of female investors including what assets they own, where they get their information and their attitudes towards investing. Here are a few interesting things we learnt from the study:

• Australian shares are the most popular asset among female investors, with 53% of women owning them.
• They are more likely to have an investment strategy and are more likely to enlist the help of professional financial advisors.
• When it comes to advice 36% of female investors look to family and friends, second only to financial advisors (37%). A quarter of women surveyed, also cited the Barefoot investor as an information source.
• Women also tend to be more risk averse, with 20% saying they prefer guaranteed returns (versus 14% of men) and 44% preferring stable, reliable returns (versus 35% of men)
• As they are most risk averse, they are more likely than men to crystallise losses by selling growth investments during a downturn
• 17% say their first investment was a term deposit.
• Women hold fewer assets and, therefore, tend to be less diversified.
• Only 45% describe their portfolios as diversified, compared to 61% of men

Related article: Are you failing the diversification test?

Investment knowledge: Men vs. Women

The study found that women are less confident and knowledgeable compared to men when it comes to investing and finances. Male investors also proved to be the most clued-up when it came to different investment assets. In fact, the study found that only one in three female investors were aware of exchange traded funds (ETFs). That’s surprising, given that the first ETF launched in Australia 20 years ago and in 2020 alone, the Australian ETF industry grew by 50% to an all-time high of $92.5 billion, according to Betashares.

The study did find that women were less engaged with their portfolios, in fact, 59% made no changes to their investments in the past year and 44% checked their portfolios quarterly, compared to men who were more likely to check theirs daily. As women tend to be less engaged in their investments this could explain why ETFs have flown under the radar from some female investors. However, this could be a potential disadvantage for female investors who have been slow to learn of new investments which could help diversity their portfolios. Women, whose portfolios are already less diversified than the typically male, are potentially opening themselves up to more risk and volatility in their investments.

Additionally, it is worth bearing in mind that many female investors may have only recently started their investment journey. That could also explain why they hold less assets and were not aware of ETFs.

Why it is important that women are set-up financially?

The ASX Investor Study was certainly illuminating and the results, particularly around the number of women who are now entering the market, are encouraging. Because while the gender pay gap is said to be narrowing, women on average are still paid $25,000 a year less than men. Another hurdle some women face is the time they spend out of the workforce to raise their children. Over time, this difference in income adds up. The greatest effects of a lower income and less superannuation are often felt in retirement and  impact it has on their standard of living in their twilight years, particularly as women tend to live longer their money has to stretch further.

If you are thinking of investing, check out Canstar Investor Hub for more tips, strategies and investment guides.

Cover image: MJTH (Shutterstock.com)

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