Figures from the recently released Women Who Invest: a report from HL’s Financially Fearless initiative, looks at why women invest, and how more women could start investing. It also explores how and where women invest.
Maike Currie, head of content at Hargreaves Lansdown and part of its Financially Fearless initiative:
“Women investors are an inspiration. They’ve overcome the barriers that can stand between us and the enormous potential benefits of investment. They’re taking control, turbo-charging their wealth, and boosting their financial resilience. There’s an awful lot we can learn from them.
At HL, we have an impressive army of female investors – 690,888 and counting. This number is growing, and by better understanding the drivers that lead women to invest, we can build on these to encourage more women to follow suit.
The structural inequalities impacting women’s financial resilience have been well documented, from the motherhood penalty to the debilitating cost of childcare in the UK, to the disparity in what women hold in their pensions at retirement age compared to men.
Every woman we can bring to investing is a step closer to helping focus not only on what women earn relative to men, but what women have and keep, which is the key to unlocking their long-term financial resilience and wealth.
This report focuses on what makes women tick when it comes to investing. Our findings show that women value the control investing gives them, which was a strong theme from our interviews with investors. We also found that gender norms are shifting – four in five women who invest feel investment is more accessible to them than it was for previous generations. It revealed that half of women who invest make financial decisions with their partners, but two in five take sole responsibility, and only around one in 20 leave things mainly to their partner. Our research interviews found that role models and financial education remain key and sheds light on the way women invest, and why they invest.
The solutions
The research explored the things that made the difference, and persuaded women investors to take the plunge, and some strong themes emerged.
Make a decision about how much you need in savings. When asking investors what encouraged them start investing in the first place, the most popular answer was finally having the money for investment. Before you start investing, you need an emergency cash fund in place. However, rather than endlessly saving, you need to make an active decision about how much is enough, and when you hit that goal, you can consider investment.
Set a goal. Our successful investors agreed that having a goal is more likely to keep you on track. Most women are investing to make sure they have enough money when they stop working. Almost half (49%) said retirement was their goal, while just over a third (35%) wanted to generate an income and a quarter wanted to build an inheritance for their family (25%).
Start small. Investing doesn’t have to be a big commitment. You can set up a monthly direct debit from just £25, so start with whatever you feel comfortable with. Almost one in three women investors take this approach. As your investments build, you will have your own experience of the value of investments falling in the short term and rising over the long term, so you don’t have to be paralysed by the worry of losing money: you know it’s all part of the process.
You don’t have to do this alone. One common catalyst for investment was going into it with someone else. Just over a fifth of people started because they were encouraged to by friends or family, and almost a quarter took financial advice. It can help just to be able to share your thoughts and ideas with someone else, and talk through your decisions. Think about your investing role model too, and talk to them. For a quarter of female investors this is their partner, and for a quarter it’s their parents. Our interviews with successful women investors found that strong female role models made an enormous difference.
Remember you don’t need to know everything on day one. Women tend to feel the weight of responsibility to get things right, and may assume they don’t know enough to get started. However, you can start with the basics, and expand your knowledge as you go along. Almost one in five female investors said finding out a bit about investments was enough to persuade them to take the plunge.
The financial industry needs to play its part too, because the report found that almost two thirds of women (63%) say the language used by the financial industry doesn’t make things easy, and our interviews showed risk warnings could be off-putting for women. It’s something HL has been addressing, sponsoring a TISA-led project delivered by the University of Nottingham to trial alternative wording that could be more informative yet less off-putting to cautious investors. These trials show changing risk warnings increases the amount women invested by 21%.
How women invest
Of the women who invest, around a third do so through a regular investment plan, which is a brilliant way to build a lump sum, and helps take timing out of the equation entirely. Sometimes you will buy when shares are rising, and sometimes you’ll buy when prices are lower and will benefit from subsequent rises.
Almost half of female investors hold their investments for at least five years. This offers the benefit of compound growth. It’s also more cost-effective and less time-consuming than chopping and changing.
Women also invest in funds, spreading their risk from day one. Around a third use funds where a fund manager actively picks investments they think will do well, while almost a quarter use funds that track an index such as the FTSE 100 or the Dow Jones.
And women ask the experts. Almost a third check expert reviews and opinions, while over a quarter get financial advice.”
About the Women Who Invest report
This is a six-month project that combines comprehensive quantitative research from 7,500 women savers and investors with in-depth interviews with 35 investors and non-investors as well as data from HL’s 700,000 clients, taking a deep dive into why female investors invest. It’s an investment manifesto for women by women who invest – making investing accessible, breaking down blockers and offering up actionable recommendations.
Its structured around five key segments that tell the story of the power of women and investing today. These are the generational shift, what makes us tick, what an investor looks like, why women invest, how women invest and taking the first step. The report, part of HL’s Financially Fearless drive to improve women’s financial resilience, close the gender pension gap and bring more women to investing, is available on HL’s website.
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