Women represent 31% of Easyvest investors. But they invest on average 30% more money than men and for a period 4 times longer. Coincidence or a reflection of a deeper behavioral difference? The finding was striking enough to make us want to know more.
It should be remembered that the financial empowerment of women is recent. In Belgium, from 1900, married women had the right to open a savings account and to withdraw small amounts from it without their husband's permission. They can also enter into an employment contract and receive part of their own salary and spend this money without their husband's permission as long as it is used for household needs. All restrictions on having one's own professional income were lifted in 1922, but it was not until 1976 (!) that total equality between spouses was declared, removing the principle of wife’s obedience and allowing women to open a bank account without authorization of their husband.
Since then, much water has flowed under the bridge. With a third of the world's wealth under their control, women have become a major economic force. Their wealth is growing faster than ever before - they add $ 5 trillion to global wealth each year - ahead of overall market growth. With the phenomenon likely to accelerate further, this proportion should logically increase, even taking into account the effects of the COVID-19 crisis, predicts a study from the Boston Consulting Group.
However, women are even less likely to invest than men - 23% versus 37% - but their performance tends to outperform that of men. The most recent benchmark study on the subject comes from the University of Warwick in England. Carried out on 2,800 investors over a period of 3 years, this study showed that the performance of female portfolios was on average 1.8% better than that of men! Other studies point in the same direction, although the difference is sometimes less remarkable: one, from the University of California, showed a performance gap of 1% between women and men; another, conducted by Fidelity Investments, reveals a female outperformance of 0.4%. Interesting fact from this survey: only 9% of women surveyed thought they were better than their male counterparts.
As women gain financial strength, why are they less inclined to invest than men? This could be a major factor: the lack of role models in the investment world, still largely dominated by men. Warren Buffet, George Soros ... Where are the women directors of large investment funds, considered market gurus, or even simply financial advisers? In addition, stereotypes seem keep playing a role in the perception that women have of themselves in relation to investment and financial management in general: the beauty who goes shopping on credit is a much more widely conveyed image than the one trading behind her screen.
While women are more and more contributors to the family budget, and very often in charge of managing this budget, most feel less informed than men when it comes to investing. Eager to get a handle on the subject before taking action, women often say they are discouraged by the jargon and frequent regulatory changes. Unfortunately, their desire for information translates too little into actions: according to Fidelity Investments, while 88% of women say that more financial education would increase their level of confidence to invest, only 6 in 10 women actually turned to a financial advisor.
Fidelity’s analysis also shows that across all salary levels, women save an average of 9% of their compensation, compared to 8.6% for men. While it has also been proven that women prefer cash savings, for those who invest, over the long term, this gap can make a huge difference in the growth of a portfolio ... especially if women get higher yields!
72% of women reject investments in “riskier” products, compared to only 59% of men. A study also reports that 31% of women who chose not to invest did so for fear of losing everything, an answer given by only 27% of men. While this female risk aversion prevents many women from investing at all, it also induces different investment choices among those who do.
One of the factors that may explain the outperformance of women over men is the nature of the products in which they invest. Several studies show that women tend to prefer funds, guided by the principle of "slowly but surely", to individual actions, by definition more volatile. Conversely, men would be more tempted to invest in lossmaking products, in the hope of seeing them increase in value in the future, and to sell their "champion" stocks in order to quickly cash in the capital gains.
Another contrast noted in Warwick's study appears to be the frequency with which men and women buy or sell securities in the markets. Over the period studied, while women carried out an average of 9 transactions, men carried out 13. Knowing that each of these movements incurs a cost, it seems that the feminine approach is less likely to erode long-term performance.
The investment horizon for women is generally longer than that of men. In reality, their investment strategy seems to be guided more by the achievement of long-term objectives - "I want to buy real estate in 10 years", "I want to give up as much capital to my children" - than maximization of short-term returns. As a result, women are less likely to watch their wallets, make adjustments or take shots on "lottery style" stocks.
Women are more likely than men to invest on the basis of their values, according to the BCG study. Thus, 64% of women say they take environmental, social and governance (ESG) factors into account in their investment decisions. In contrast, men tend to focus on pure performance: 96% of men polled in the study say they invest to increase their wealth and base their decisions on the past performance of selected products.
However, gender differences in investment tend to diminish as generations get younger. According to the BCG study, 70% of millennials say they manage their financial decisions independently, compared to just 40% of baby boomers. It also emerges that "millennials", men and women, understand the issue of investment more and more evenly, particularly in terms of societal impact (ESG).
Even if the panorama of global wealth is feminized, most banks are helping to perpetuate the historical social norms according to which men are the first decision-makers in financial matters. By recognizing that the women's segment is not just a marketing opportunity but a gigantic business opportunity, and by personalizing their approach beyond even the gender issue, financial services could make the 2020s a fundamental decade for women investors.
Women represent 31% of easyvest clients, but 36% of total investments, which is 4% more than the world picture given by the BCG. While our solutions were never gendered, they just seem particularly suited to the female view of investing. The inherently wide exposure offered by ETFs, the rationality of this type of investment and the almost unbeatable long-term returns are strong arguments for women investors. And since it seems that their yields are often better ... don't hesitate to do your own simulation!
Note: This article was written when Easyvest was authorized and regulated by the FSMA as an agent in banking and investment services.