Closing the gender investment gap

by InvestEngine

There is a lasting gender disparity when it comes to investing. According to a report from Boring Money, women make up just 40% of investors, down from 41% in 2021. This is a problem, putting women at a potential disadvantage when it comes to their long-term financial situations. 

Women are, according to broad surveys, more likely to save money than men. They are also overwhelmingly less likely to engage in speculative trading. Interestingly, women are more likely than men to deposit any savings they have into an ISA, which suggests a more long-term, risk-averse approach to investing. 

How big is the gap?

Earlier this year, a study from corporate investment bank BNY Mellon highlighted the true scale of the disparity. If women invested at the same rate as men, the study finds, there would be an additional $3.22 trillion invested by private individuals globally – significantly bigger than the entire of the UK’s GDP. 

There’s also a gap in terms of what women invest in relative to men. The same study estimates that, were women to invest as much as men, another $1.84 trillion in additional capital would be added to socially responsible investments. The majority of women (66%) say that they actively try to invest in companies that align with their personal values. 

It’s not surprising that the investment gap leads to inequality in the amount that women have saved for retirement relative to men. In the UK, for example, the OECD estimates that the gap is as large as 40%. The factors that lead to this disparity are complex, but it throws the necessity for long-term financial planning into sharper relief. 

We’ll explore why such a large gap exists, but it’s clear that closing the gap is vital. Not only is it invaluable for the long-term financial stability of women, but it could also see an acceleration in the push towards more sustainable investing and greater financial security in retirement for women. 

Why does the gap exist?

There are a number of reasons for the gender gap in investing and these will differ from geography to geography. We should also consider the fact that other imbalances will need to be addressed before the investment gap can be fully closed. There, however, three key reasons most commonly cited for the gap:

Engagement: one of the most common reasons cited is a lack of engagement from the industry and the education system when it comes to encouraging women to invest. As a result, just 28% of women feel confident investing their money, according to the BNY Mellon study. 

The pay gap: another significant reason for the investment gap is pay disparity. Though it’s narrowing, the gap is still around 15% on average in the UK. Couple this with more common child care commitments and more involvement in part-time work, and the scale of the pay gap becomes apparent. 

Relative risk-aversion: nearly half of the women surveyed by BNY said that investing in the markets is too risky for them, with 42% having a low tolerance to risk. Of course, this relates directly to the first two key points here; ensuring that women have the tools to invest confidently is a major hurdle for the industry to overcome. 

How can we close the gap?

Closing the gender investment gap will take time and more needs to be done to ensure that women have the same access to investing as men. Having said that, it’s not enough for education and engagement to improve; the industry itself needs to change if we’re to reach any kind of parity. When 73% of asset managers admit that their service is primarily aimed at men, the need for active change becomes clear. 

For investment providers, removing barriers to entry is a simple way to improve accessibility in the world of investing. At InvestEngine, we’ve worked to ensure that our service remains unbeatable in terms of fees and we see the demystification of investing as part of our role. It’s easy, for example, to build a globally diversified portfolio in minutes when you invest with us.  

Given the current economic situation, long-term financial planning has rarely been so important. Both women and men should include investing as part of their financial strategy and we believe that a diversified portfolio with a broad time horizon should be top of your list of considerations. 
Marianne Oliver, Head of Operations at InvestEngine, says: “We believe financially empowering women is one of the key steps towards ending domestic abuse. Allowing women to take control of their circumstances and enable them financially to make decisions that will secure their future is the necessary crutch so many women need today.”

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