The gender investment gap: why women need to invest more

Published on 28th July, 2021 at 05:30 pm

An online survey conducted by Sanlam reports that 86.4% of South African women ranked financial worries as the top reason for their sleepless nights. Further to this, the study found that only 22% of women have a financial planner who helps them with their finances.

“We’ve come quite a long way,” says Nicki Blignaut, senior financial planner and principal at 2one2 BlueStar, underwritten by Sanlam. “Women are being educated, they’re independent and are taking care of their own financial wellbeing.” And yet some surveys, like this 2020 Pew Research Center report, say that even as the gender pay gap slowly begins to narrow, there exists another crevasse to consider: the gender investment gap. It puts forward the theory that women tend to be less inclined to invest than men, ultimately damaging their wealth creation in the long term.

Why it’s so important for women to invest

Blignaut says that any woman who isn’t investing should get on it – for two reasons in particular. First, time is perhaps the single most important factor when it comes to growing your wealth. “People in their 40s and 50s often say to me, ‘I wish someone had told me this when I was 18.’ Compound interest is the main buzzword here. Let’s say you start investing at 18. By the time you’re 40, you’ve already got 22 years of investing and 22 years of compounding interest behind you.” It’s also no surprise that women tend to outlive their male partners. According to the 2020 World Health Organization’s Health Life Expectancy report, women outlive men everywhere in the world, which means a woman’s retirement savings need to be even more robust.

The second reason women can’t sleep on the investment game is because a savings account simply won’t cut it. A BlackRock survey of American investors revealed that women tend to have a higher portion of their assets in cash in the bank compared to men, who are marginally more heavily invested. In fact, according to Ellevest – an investment platform created by women for women – of all the assets controlled by women, 71% is in cash – i.e. not invested, which ultimately puts women on the back foot. “A bank account gives very restrictive interest, and it’s usually a fixed rate,” explains Blignaut, “whereas by investing and going in more aggressively, you’ve got the opportunity to make higher returns.”

With the market taking a nosedive in recent months, investing may be the last thing on your mind right now. But hidden amid the storm are golden opportunities to grow your wealth. Read this for expert tips on how to spot them, and what to do next.

Women make better investors

The claim that women make better investors is largely predicated on assumptions about appetite for risk. “Results indicate that male investors are more risk-tolerant than their female counterparts,” stated one study of South African investors, while hedging its bets by also acknowledging that “level of education significantly influenced their level of financial risk tolerance” and that “personality traits were found to influence female investors’ financial risk tolerance.” Another South African study found that while certain behavioural biases may occur according to gender, age was also a significant factor. “The results showed women over the age of 60 years earning statistically significantly higher returns than men, and older investors having lower variances in return.”

How would this affect a long-term outlook? “Let’s say that, like last year, your markets are going up and down like crazy and you have major volatility. Someone who’s more risk-averse will typically wait the market out. Someone who’s more risk-tolerant may demand to be cashed out, but then by the time they get back into the market, they’d have lost a good portion of their portfolio,” explains Blignaut.

How to get started

“Don’t succumb to analysis paralysis,” says Blignaut. “Even if you’re intimidated, rather invest a little than do nothing. By doing nothing, you may as well put your money under the proverbial mattress, where it’s not going to grow at all. Regardless of who you are, if you don’t invest, you’re not going to grow your money.” Here are some tips to get started:

#1: Speak to an expert
“A financial planner can provide you with options to suit your unique circumstances better than Google can,” says Blignaut. Book a meeting with one today.

#2: Know your goals and strategies
There’s a whole world of investment vehicles out there. Knowing what you want to do with your money, and what your appetite for risk is, will help your planner choose the right one for you.

#3: Diversify
“Diversification always has been and probably always will be key,” says Blignaut. “If you’re going to put all your money in any one basket (whatever it is), then you’re taking a risk.”

Want to invest but don’t know where to begin? Speak to a financial planner, who is best positioned to explore your options and help you make financial decisions to grow your wealth effectively. Book a meeting today, here.