Why Aren’t More Women Investing?

Fidelity says women outperformed men in the stock market by 0.4% over the last ten years. If so, then why aren’t more women investing?

Our toxic internalised attitudes create financial disadvantages that make investing as a woman harder than it should be. These then create economic hurdles:

The tragic outcome is that this hinders our ability to compound wealth by investing in the stock market. It blocks our ability to resolve issues like climate change, poverty, domestic violence and even gender/cultural diversity in the workplace.

Key points

It starts with our beliefs about women, money and competency

We all like to think we’re not sexist. I don’t think anyone tries to be sexist.

But as we grow up, our brain picks out patterns that form the basis for our unconscious biases. These can be tiny things, like judging how competent a woman is by the length of her hair.

We also often mistake confidence for competency.

If women start to believe they are incompetent (“the stock market is only for smart, financey people”), this makes them feel unconfident (“I don’t understand it, so it’s not for me”) and think that the stock market is too risky for them (“oh, I could never do something like that”).

From a young age, women make connections from their observations going through life.

“Men have power. Power means money. Money is masculine.“

But if more women started building wealth by investing in the stock market, they would have more money. And more power. And don’t get me wrong, almost all men would also be better off if women had more economic power.

1. Women face hurdles accessing financial education and information

“Globally, as few as one in 10 women feel they fully understand investing, and less than a third of women (28%) feel confident about investing some of their money.”

“There also is a tendency to use financial jargon and overcomplicated investment language in order to foster a sense that the investment customer is part of an exclusive club. This kind of marketing is actively off-putting to women: almost a third (31%) of female consumers said that overly complicated language [which can be unclear or confusing] dissuades them from investing or investing more than they currently do.“

2022 BNY Mellon report, The Pathway to Inclusive Investment

It’s a ruthless cycle. We know women tend to earn less and have less disposable income to invest. But if you are poor then you also have less time to figure out how to best manage your finances or learn how to invest.

“Every minute more that a woman spends on unpaid care work represents one minute less that she could be potentially spending on market-related activities or investing in her educational and vocational skills.”

Organisation for Economic Co-operation and Development

But it’s not all doom and gloom.

Investment confidence improves with financial education.

47% of the Indian women surveyed by BNY Mellon said they felt confident about investing, one of the highest rates in the world. Unsurprisingly, half of Indian women also stated they learned about investing from their parents. They probably started ‘em young. 

2. Women face a 23% gender pay gap

Women tend to earn only 77c to a man’s dollar in Australia. (The US gap is 82c.) That means nearly $25,792 less every year than men. That means $483.30 less each week that could go towards investing for retirement.

They are more likely to be in a lower-paid occupation, working part-time and doing the lion’s share of unpaid caretaking and housework. So women are more likely to be time poor as well.

Possibly for the next 136 years.

3. Women face hurdles investing in the stock market and compounding wealth

All of the previous three barriers – toxic socialised beliefs, financial illiteracy and pay gap – culminate in the gender investing gap and the gender wealth gap.

While women actually tend to have less disposable income available to invest, they also hold misconceptions about the minimum amount of money needed to start investing.

And that’s not all. The finance industry has marginalised women, be it as clients, colleagues or fellow investors.

The finance world is run by men

You’re shocked, I know. 

“Merrill was a guy, and so was Lynch. Goldman? A dude, and Sachs as well. Charles Schwab is a man, and so was E.F. Hutton. Gordon Gekko was an alpha male. And Jordan Belfort, the Wolf of Wall Street? Total bro.”

Ron Lieber, NY Times

Half of the asset managers surveyed in the BNY Mellon study said less than 10% of their group’s fund managers and investment analysts are women. And by Aberdeen Standard’s estimates, women manage only 1% of hedge fund assets.

Try Googling this. They have a famous “Charging bull” bronze sculpture on Wall Street in New York. It is the epitome of masculinity, strength and aggression. The tourist’s tradition is to rub the bull’s now-very-shiny testicles for good luck and fortune.

But then we have the statue of the “Fearless Girl”, the representative for women’s power and space in the investment discourse. Does she look like she’s welcomed on Wall Street?

The finance world is run for men

Did you blink?

A hefty chunk of the advertising language, colour schemes and imagery consciously target male consumers.

“73% of asset managers state that their organization’s investment products are primarily aimed at men.”

2022 BNY Mellon report, The Pathway to Inclusive Investment

These adverts use metaphors that appeal to taking on risk or taking command and control, such as in extreme sports. 

All of the role models are men

Have you heard of that investor, Warren whats-his-name? Of course you have. Then how about Benjamin, Peter, John, John or George? These are some of the names of 11 of the greatest investors according to Investopedia. And better yet, they are all…

…white dudes, m’afraid. 

Women face the same lack of role models in the workplace as when they are customers navigating the financial world.

Most fellow investors in the community are men

On the consumer side of things, I’m sure some of these guys don’t intend to be exclusive. That’s just what happens when you put a bunch of boys together who are aware that they are in the company of other dudes.

But *sigh* assumptions are made. 

Occasionally, I get halfway through an article on investing or personal finance when I am confronted with a “your wife” jibe. Don’t believe me? Check out this Forbes article on how to prepare a spouse for managing money.

Have you noticed that I’ve tried to write this article gender neutral?

“When I say ‘we’, I mean everybody. There is more power behind a ‘we’ when everyone’s in the room.”

The FinanceFem

But we do need to be sensitive to the unique concerns, perspectives of and barriers facing women, so the other half of humanity feels welcomed into the investing space. 

And it turns out this is very important for the whole of humanity. I’m sure I sound dramatic.

If we could get more women into investing, this would go a long way to advancing female empowerment, climate change, poverty and economic growth for everybody.

How do we get more women to start investing?

There is hope.

The answer is financial education and finding a community.

The first step is being aware of how our internalized beliefs and unconscious biases hold women back from financial success. That’s all of us.

The second step is breaking those vicious Cycles of Doom by helping ourselves and the women around us learn about investing and the phenomenal power of compound interest. Spread the word, people!

Lucky for you, you’re already enlightened since you’ve read my article 🙂

Featured image: Yan Krukov