Let’s back these generalisations up with some data from our latest survey. Fifty-one per cent of women have savings accounts, compared with 50% of men; 40% have cash ISAs, compared with 41% of men. So cash is queen as well as king.
But turn to the stock market and female engagement falls off a cliff. Just 10% of women have a stocks and shares ISA (it’s 17% of men), while only 7% hold other investments or unit trusts, compared with 14% of men. The ratio of male to female customers among the top 10 DIY investment platforms is 68 to 32.
It’s a similar story with private pensions, where just 11% of women top up their (typically smaller) retirement funds, compared with 17% of the chaps.
Why are women so turned off?
The four biggest factors we hear in our research are affordability, risk, trust and a feeling of not knowing where to start. I have long felt that risk is the wrong word to describe market volatility.
The word risk, in our day-to-day lives, suggests imprudent or silly behaviour. Society tries to deter us from taking risk from the time we start to crawl and pick things up. In a focus group we ran, Lorna, a 54-year-old administrator, summed up the popular view.
“Investing is just like gambling,” she said. “I’d rather keep my money in the bank even if I only get pennies back.” She, like three of our seven women profiled, was heavily exposed to property. Cash and property rule. Yet, over an 18-year period, the authoritative and long-running Barclays Equity Gilt Study tells us that the probability that shares will outperform cash is 99%.
Savers’ behaviour over Junior ISAs, is particularly telling about our skewed interpretation of “risk”. Thanks to an investment horizon that stretches far into the future, that vulnerable gurgling baby can stomach the rollercoaster of emerging markets in a way that a middle-aged adult cannot.
Yet women are three times more likely to open a cash Junior ISA than a stocks and shares Junior ISA. Treasury data confirms that 73% of Junior ISA subscriptions goes into … yes, cash. With interest rates at historic lows, does this parking of long-term savings in cash not amount to an epidemic of “reckless caution” that will have disastrous long-term consequences?
Your capital is at risk so you may get back less than you originally invested. The value of any investments and the income from them may fall as well as rise.
Trust is also critical. One member of our focus group, Rowena, 42, a writer, asked: “Do they actually know what they’re doing?” … and referred to the 2008 crisis.
In what strikes me as evidence of worrying misplaced trust, women are more likely to look to their bank for financial advice than men, with 30% saying that the bank would be their first port of call. Ouch! Most banks simply sell their own products rather than offer proper independent advice.
There have been many studies of varying academic credibility which suggest that women make better long-term investors than men.
A seminal study called Boys will be boys: gender, overconfidence, and common stock investment by two academics from the University of California, Davis, showed that women investors beat their male counterparts by around 1 percentage point a year.
With long-term returns from the stock market averaging about 5% a year, that’s a significant part of overall returns. Women’s ability to resist the urge to fiddle reaps rewards. An analysis of the 60,000 users of Openfolio, a US online investment-sharing platform, found that, in buoyant 2014, women outpaced men by an average of 0.4 of a percentage point.
In 2015, when markets fell, women lost an average of 2.5%, compared with a loss of 3.8% for men. This is not picking the winners in a rising market, but avoiding the worst effects of a falling market.
Outperformance has also been claimed at professional levels. Research by HFR, a specialist hedge fund analyst, into hedge fund managers found that funds managed by females had returned 59% since 2007, against average returns of 37%.
What next? The industry has to rip up its timid rule book and stop writing generic gobbledegook, talking to enthused “hobbyists” investors, being vague on charges and building “thermometers” (here’s the problem) instead of “thermostats” (here’s the solution).
Five thoughts for potential investors
1. With the exception of those that have been eradicated through war or revolution, stock markets have recovered from every single downturn, often quite rapidly. Hold your nerve when shares fall.
2. The Barclays Equity Gilt Survey shows that the probability that investing in shares will outperform saving in cash is 75% over a five-year period, increasing to 90% over 10 years and 99% over 18 years.
3. “Tracker” funds, which simply mimic the wider stock market, are a low-cost way to get going – you have to take just one decision. They are baskets of stocks that effectively “back every horse in the Grand National” and get you going with minimum pain.
4. You don’t have to be interested in the nuances of the Chinese stock market, oil prices or discounted cashflow to be an investor. Technology means that you can buy a perfectly good “investment ready-meal” online.
5. Most women in our focus group thought that you needed to save between £1,000-£4,500 a month to be an investor. In fact, most online investment shops will let you get going with a £50-a-month direct debit. And, simplistic as it sounds, if we are to talk more effectively to a new generation of female investors then maybe – I know it’s radical! – senior managers in British industry should finally do something about diversity?
In 2017 it’s still all too common to turn up to talk to a board of directors and realise that you are the only woman in the room. It is interesting to wonder whether a similar preponderance of all-male leadership teams would affect sales, engagement and product creation at household names such as John Lewis and the BBC.
Today, 53% of British women describe themselves as uncomfortable with investments. A further 32% are neutral or “don’t knows”. If we can fix this and encourage more women to at least consider investing as a long-term alternative to cash savings, it could – given evidence of their better investing skills – be a single act of enormous wealth generation for both individuals and the country at large.
Read next: Just how much better at investing are women?