When it comes to investing and the stock market, 2023 is an important year. It marks the 50th anniversary of an event that helped shape the financial sector and turn it into what it is today: women being admitted into the stock market.
When the London Stock Exchange accepted women into its fold in March 1973, it broke a 200-year tradition of only providing access to men. While it was a huge step towards equality, it seems that when it comes to investing, women have a much lower appetite for the stock market than men.
According to Unbiased in December 2022, women are typically much more reluctant investors than their male counterparts. It reveals that 10% of women have a Stocks and Shares ISA compared to 17% of men, and 7% of women hold other investments or unit trusts compared to 14% of men.
Despite this hesitancy to invest, the article also reports that studies show that women might be better at investing than men. Discover four reasons why women might be shrewder investors, and why working with a financial planner could help women develop the confidence they need to take the plunge.
Before you do, let’s look at why investing might be something you want to consider.
Historically, the stock market has tended to outperform cash savings
Data suggests that the stock market has tended to provide greater growth potential than cash savings over the long term. This is backed up by research, such as studies carried out by Schroders that found that between the start of 1952 and the end of May 2022, UK equities returned 11.7% a year on average.
This compares to cash, which returned an average of 6% a year. Schroder’s findings dovetail into a study by Standard Life, which also reveals that £10,000 invested in December 1985 would have been worth around £200,000 in May 2022.
This, Standard Life reveals, is significantly better than the best cash return over the period. That said, always remember that past performance is no guarantee of future performance.
As you can see, investing your money could expose your wealth to greater growth potential, which is why it might be something you want to consider. Let’s now look at why, as a woman, you might be better at investing than you think.
1. Women are less impulsive
Investors should always expect short-term downturns, although when they do happen, they can be extremely uncomfortable. When downturns take place, holding on to the investment tends to be the better strategy, as selling it to limit potential losses can turn a paper loss into an actual loss.
Furthermore, selling your investments deprives your money of the chance to recover should the markets bounce back, which historically they have typically done. This is where women can excel, according to research, which suggests women might be better at remaining calm and avoiding the impulse to sell.
An article by the Motley Fool reveals that one study found just 8% of women liquidated investments during market volatility, compared to 15% of men.
2. Women don’t keep checking their investments
The article also reveals that women are less active investors than men. While you may think this is a disadvantage, the Motley Fool article shows research by Vanguard that suggests it might be a strength.
The study found that women tended to log on to their accounts half as often as men and traded 40% less frequently. As such, women might be less likely to become spooked by their investment’s performance and decide to sell.
This suggestion is backed up by another study, also mentioned in the Motley Fool, which reveals that men’s trading activity reduced their yearly returns by 2.6% a year. Women’s trading activity reduced theirs by 1.7%.
3. Women are better at compartmentalising money
Women are more likely to compartmentalise the way they think about money, and will often “ringfence” cash to ensure they don’t dip into it. Men, on the other hand, might be more tempted to do this.
Being able to ringfence your money could help you as an investor, as it means you’re more likely to mentally lock the money you’ve put into stocks and shares away in your mind. As a result, women are less likely to be tempted to dip into it to spend it on something they would like, which could increase their wealth’s potential for future growth.
4. Women take less risk
According to Motley Fool, women tend to take on less risk than men. It reveals research by Wells Fargo that found that women took around 82% of the risk that men took when investing.
Furthermore, the article adds that there is evidence that women are less likely to join investing trends or fads. Men, on the other hand, tend to be more eager to invest in the latest asset class everyone is talking about, something that could cost them dearly.
Get in touch
As you can see, the evidence suggests that women have the potential to be very good investors, yet data suggests they are not as confident as men. According to Fidelity, just one-third of women see themselves as investors, with the majority not feeling confident about investments and making decisions around them.
If you’re one of them, a financial planner could help you understand the stock market and economic environment, as well as the risks involved with investing and any potential costs. Furthermore, they are on hand to explain what changes in the economy or geopolitical landscape could mean for your investments, and the options available to you.
As a result, you’ll feel more confident about the decision you make, which in turn could expose your wealth to greater long-term growth potential. If you would like to discuss whether investing is right for you, please email admin@stonegatewealth.co.uk or call 01785 876222.
Please note
This blog is for general information only and does not constitute advice. It should not be seen as a substitute for financial advice, as everyone’s situation will be different. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Investments carry risk. The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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