Genetically, male and female DNA is 98.5% identical. Men and women even have the same hormones. Of course, the ratio of these hormones cause some differences but are there key differences when it comes to how men and women invest their money?
Why should women invest?
While there’s still a gender pay gap and a gender wealth gap, women are in a better financial position now than any previous generation. Many women have surplus cash that could be put to work to achieve their future goals. Accumulating cash in a savings account isn’t necessarily a bad way to manage your money. Unfortunately, though, bank accounts don’t tend to offer interest rates that beat inflation. That means that the value of your money, in spending terms, declines slightly each year it stays in the account.
Where should women invest?
Recent studies have indicated that women are more conscious of ethical investments than men. When creating a bespoke investment portfolio for a female investor, should we therefore be focussing on investments that help the environment and do social good?
There was a time when environmental, social and governance (ESG) issues were the niche concern of a select set of ethical investors. That time is long gone and we see the consideration of ESG factors becoming a key part of investment management. ESG or Sustainable investing has also grown hugely in popularity over recent years – the number of ESG funds more than doubled between 2021 and 2022, from 997 to 2,248. It’s worth noting that historically, investors have been concerned that focusing on ESG would mean sacrificing investment returns. It’s now been proved that, broadly, the opposite is true. In 63% of cases, ESG propositions have a positive impact on equity returns (compared to 8% of cases where the impact is negative).
The debate remains about whether investing is approached more emotionally by women than men but the reality is that women tend to invest less often than men overall: under 50% of women currently have money in the stock market compared to almost 70% of men, according a recent NerdWallet survey. That’s despite evidence that female investors tend to outperform their male counterparts when investing over the long term. So how do we attract more women to invest? If word on the street is correct and ESG enthusiasm among women is higher than among men then perhaps this has the potential to encourage higher investment overall. The logical conclusion would be that an ESG investment focus leads to superior wealth creation over time.
How can you start ESG investing?
There are many ways to invest. While it’s possible to research and buy ESG funds yourself through an online investment platform with relatively low costs, one should be mindful of ‘greenwashing’ – it is important to ensure that all underlying investments do meet the required ESG standards.
One alternative, which may be better suited to investors who lack the time or experience to manage their own investments, is to speak to a qualified investment manager. They can create a bespoke investment strategy that’s tailored to your specific ethical requirements and financial goals. We offer this service at Investec, and you’re very welcome to get in touch if you’d like to find out more.
This information does not constitute financial advice or a personal recommendation. Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest.
