Women & Investment Risk
The gender gap in salaries is well known and efforts are underway to close this gap for good. With media attention this is likely to happen in the next few decades however often overlooked or not considered important is the investment gap. Compared to men, women are much less likely to invest their savings, and we miss out on significant wealth as a result.
Women are typically very good savers, yet despite this we accumulate less wealth overall. This is due to a number of obvious reasons such as time out of the work force to raise a family, caring for older family members and not earning high incomes. These reasons alone should be the drivers for investing. Women know instinctively that they will have less in retirement still choose to do nothing about it. Why is that? Lack of time? Lack of confidence? Never quite getting around to it? My guess is a combination of these including lack of knowledge (otherwise disguised as fear!).
Interestingly, when women choose to invest we are actually very good at it. In the UK a behavioural economist, Professor Neil Stewart* at the Warwick Business School found women outperforming men by 1.8%. Researchers surveyed 2,456 investors of which 450 were female between April 2012 and July 2016.
The research also showed one of the main reasons for men’s underperformance is overconfidence! Men tend to trade more frequently and make riskier investment decisions. Women tend to seek advice and invest for the long term, trading less often as a result. That sounds like a philosophy we love to promote:
TIME IN THE MARKET, NOT TIMING THE MARKET.
There is no doubt that investing carries risk, but it could be argued that not investing is even riskier! If you hold cash over large periods of time (ie 10 years+) you may be missing out on significant returns.
Investing can seem incredibly complex with so much choice available. So where should you start? Well, did you know that you are already an investor? Superannuation! Why not start by checking what investment option you are in and get online and compare it to other options your super fund offers. Look at the asset allocation. Asset allocation tells you what type of assets are in your investment selection. Are they diversified? Is there a lot of unlisted and alternate assets? Is there too much cash and fixed income? Do some reading on passive investment strategies (otherwise known as index investing, see our prior blog on Warren Buffet).
You can also choose investments that align to your values or interests such as ethical investing (companies that have social policies and standard – see our blog on green investments). If you are still not sure where to turn, then seek advice. A professional will uncover your goals and comfort level with risk then help you choose something that aligns with these factors.
The options are endless, however your time is not. Make 2019 the year you became an investor. Your future self will thank you for it.
This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs