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Female investors should be role models, not rarities

Author:

Victoria Usher

Published On:

March 8, 2024

Published In:

PR & Communications

Female investors should be role models, not rarities

 

Female investors shouldn’t be a rarity.

While Hollywood movies such as The Wolf of Wall Street popularised images of male-dominated investment scenes, progress in improving gender equality should point to these stereotypes as museum pieces, labelled as ‘outdated relics from the 1980s’. 

But while we’ve thankfully left the power suits behind, it’s clear that limited female inclusion remains a present-day problem. Despite the government identifying a lack of diversity in venture capital investment last year, markers across the VC ecosystem continue to point to a deficiency in female success. Between January and October 2023, only 2.8% of all VC funding was given to women-only teams.

Progress is being made with more open conversation around the topic, but recent research still shows that 73% of UK women aren’t comfortable in making investments, compared to 58% of men. This imbalance has remained firmly in place across the past few years, persisting through multiple waves of economic upheaval. Even amid peak pandemic-fuelled uncertainty in 2021, studies found that the number of men trading or investing online still outnumbered female investors by some margin, at almost half versus three in ten.

As well as capping the potential for diverse thinking to drive investment innovation, a lack of female input is significantly restricting market liquidity and the growth it could stimulate. 

Financial leaders estimate that if women invested at the same rate as men, the volume of assets currently under private management — and providing support for businesses — would increase by $3.2 trillion, which exceeds the UK’s total Q3 GDP.

With so much to gain from encouraging women into investment, there is a need to look closer at the core barriers to entry and how they can be addressed.

What’s holding back female investors?

One immediate block for many women is the perception they are starting on the back foot in an environment traditionally reserved for men. In 2016, women asked to describe their view of the UK finance space responded with terms that speak to a sense of near-hostile exclusion, including “unwelcoming”, “patronising”, and, specifically, “male-dominated”.

There are, however, deeper concerns at play. Reflecting other industry descriptors such as “complicated” and “full of jargon”, recent surveys reveal one of biggest reasons women don’t feel confident investing is because most (73%) think they aren’t knowledgeable enough, with 52% citing insufficient understanding of online investment and trading. These figures suggest a negative cycle, where limited insight and confidence are preventing women from experimenting with investment — and building knowledge and self-assurance in the process. Moreover, they also underline the crucial need for greater education opportunities.

Alongside these anxieties, there is evidence to indicate slightly higher risk aversion. In a study that asked male and female participants what they would do with £1,000, more women than men said they would opt to save rather than invest (41% versus 31%). Although the urge for caution in an ever-shifting economic climate isn’t surprising, my own experience and multiple studies illustrate that investment delivers stable financial rewards, even in a downturn. 

Why is evolution so important?

Reasons to change the unequal status quo are numerous. Despite increased transparency into and efforts to close gender pay gaps, UK men continue to earn 7% larger salaries than women on average. Combined with providing disproportionate unpaid care and longer periods of maternity leave, government research shows female professionals hold 35% less in their pension pots by the age of 55; resulting in what has been dubbed “the great pension chasm”.

While long-term resolution of this challenge will require broader measures, investment is an effective way for women to independently improve personal wealth. And they have a good chance of achieving sizable gains, with data proving women outperform men in terms of ROI.

Analysis conducted over ten years has demonstrated that women see 0.4% higher returns in contrast to male investors. Interestingly, part of the explanation for these elevated outcomes is turning risk aversion into a tactical advantage. Further analysis has found female investors make frequent use of profit-protecting trading orders; with four in ten applying stop-losses to half of their trades and typically hold onto greater net assets as a result.

All of which underlines the potential women have to reinforce the economy by using their funds and shrewd management skills to bolster capital for companies, including giving early-stage start-ups a crucial initial boost and securing lasting dividends through angel investment.

How can women leaders help break the barriers?

While the lack of access to financial education and training is another issue in need of wider action, business leaders can make a vital individual contribution. The value of small steps to encourage confidence-increasing learning shouldn’t be underestimated, including directing women who feel under-informed about investment to useful (and affordable) resources they can harness at their own pace. A key recommendation is downloading free app Investmate, which offers on-the-go education for all experience levels, in line with unique finance goals.

For extended impact, getting involved with events is an influential way to foster community and collaboration. Innovative companies including FirstPartyCapital (FPC) have recognised the importance of bringing together female investment experts and firms led by women to highlight real-life successes, act as relatable role models, and share practical guidance.

The fundamental issues for women investors come down to an absence of opportunities and misapprehension. Persistently narrow entryways have not only maintained the myth that finance isn’t a female-friendly sector, but also denied women the chance to test their skills and find that they can drive smart — and even superior — investment decisions.

While mindsets are beginning to change, more work is needed to push through barriers and eradicate retro industry perceptions. For female leaders, this makes it paramount to unite around the common goal of mutual empowerment, so that more women can invest, build their wealth, and help businesses thrive.

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