Why Women Participate in the Markets Less Than Men – And What We Can Do About It
The markets may rise and fall more than we’d like, but there’s one thing that has remained consistent for years: the gender investment gap. For reasons we’ll get into below, women are more likely to contribute to savings accounts than to invest their hard-earned dollars. Why is this? What are the consequences? Most importantly, what can be done about it? We’ll dig into the gender investment gap in this article, answering these questions and more.
Gender Investment Gap: By the Numbers
First, it’s important to note that the gender investment gap is not a uniquely American phenomenon. Recent research by BNY Mellon showed that only 10% of women globally felt they fully understood investing, and only 28% in the same survey said they felt confident about investing their money. Finally, and most concerning, was that 45% – nearly half! – of the women in the BNY Mellon survey viewed the stock market as “too risky” to dip a toe into the market waters at all.
Why it Matters
These numbers are problematic for several reasons. First, we always want to tip the scales toward equality. However, there’s more to it than that. Women are due to inherit about 70% of private wealth in the next 40 years. If they aren’t investing that generational wealth and growing it, it’s unlikely to lead to long-term financial independence. After all, if you’re keeping your money in a bank account (or under your mattress) instead of investing, you’ll have a hard time outpacing inflation. And if women are inheriting nest eggs that aren’t growing and that lose value over time, they can’t pass assets on to the next generation either.
The Obstacles Women Face
So, what’s behind the gender investment gap? The BNY Mellon study identified three primary hurdles keeping women out of the stock market:
Low Industry Engagement
With only 28% of women saying they feel confident about investing, it’s clear that the majority aren’t taking the time to learn enough to gain confidence in investing. Since there’s not a lot of gender diversity in financial advising, with only 5% of RIA firms being women-owned and only 27% of all financial advisors being female, the industry as a whole probably needs to do better at communicating with and engaging with women.
The BNY Mellon survey also found that women tend to be operating under the assumption that they can’t start investing until they have quite a bit of disposable income – more than $6,000 in monthly disposable income, in fact. That means that women believe they need $72,000 in extra income each year in order to enter the markets. That figure is way above the average American worker’s income for 2022 ($54,132), which means many women operating under this misapprehension don’t see investing anywhere in their financial futures.
Significant Risk Aversion
Every investor’s risk tolerance is different, but the BNY Mellon survey showed that 45% of women are so risk-averse that they don’t feel safe participating in the stock market at all. Their perception seems to be that all investments are high stakes, which of course isn’t the case.
Can We Bridge the Gender Investment Gap?
One of the more shocking revelations from the BNY Mellon study is that attitudes within the financial services industry are likely driving a continued gender investment gap. Of those surveyed, 86% of professional asset managers said they default to looking for male customers. A full 73% said their firms target their investment products primarily at men. And with so much discussion around investing focused on things like “out-performance” and “tripling gains”, maybe it’s smart to remember that female investors aren’t necessarily motivated by competition or “machismo” the same way many male investors might be.
So, what can we do? A change in the language, images, and messaging used within the financial services industry could make a meaningful difference going forward. Making educational resources like financial blogs and podcasts accessible and empowering for all investors, women included, is important.
At Davidson Capital Management, our firm was founded back in 1989 with the following guiding principle: all investors deserve accountability, respect, and the opportunity to have a personal relationship with their investment management team. That principle still holds true today, and we are honored to serve both male and female investors. We have financial advisors in San Antonio & Corpus Christi ready for you to schedule a call.
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