Women & Investing

Topic: Investments

Alexandra Jemetz CIM

April 14, 2016

Image used with permission: iStock/retrorocket


Print & Share

Print

Women & Investing

The evolution of the workplace has brought many positive changes for women: increased business ownership, more executive positions, greater corporate board representation, shrinking wage-gaps (though mostly among younger workers) and increased control over their – and their household’s – money.

Despite this, “women are having a harder time than men in balancing everyday expenses with saving for retirement, and that lack of engagement in financial matters is translating into greater risk aversion – holding women back from realizing their retirement goals”, according to a recent study conducted by BlackRock on Canadian women.1

There are a few reasons why so many women shy away from engaging more in finance and investing. The one cited most often is lack of confidence.  A number of factors are at the root of this problem.

Although the glass ceiling is starting to crack and the wage-gap is shrinking in certain areas of the workforce, women, on average, still face challenges when it comes to pay-equity.  The average personal income of the women in this study was 25% lower than the male participants, and their household savings and investment was 46% lower.  “Women respondents in the survey were significantly less likely to be working; and those who are working are much more likely than men to have part-time employment.”

Another significant factor was a lack of engagement on women’s part, contributing to a knowledge gap when it comes to retirement planning.  The unfortunate consequence of this is women’s greater pessimism about their futures.  Psychological and biological theories aside, this tends to lead to a more conservative investment style, emanating from a more profound fear of loss and therefore higher risk-aversion.  This goes against one of the most basic tenets of investing – in order to get any return, you must take some risk.

To be, or not to be…cautious

There are two main arguments for why women need to improve their money sense and be more aggressive in their investing habits: they typically have longer time horizons than men and their conservative investing nature inhibits potential opportunities from the risk/return trade-off.

Statistics from all over the globe come to the same conclusion: on average, women live longer than men.  It is very likely that at some point in her life, a woman will be left in charge of the family finances, and given the observations above, it is no surprise that she will be facing some strong headwinds in the management of her money.

For an investor with a long time horizon and whose objectives are to grow capital at a rate which exceeds inflation, his or her portfolio needs to be diversified beyond cash.  A retiree living off his or her investment portfolio must also cover lifestyle expenditures with those returns.  His or her portfolio should arguably have a bias towards equities, which offer a natural hedge against inflation, and (at least in this market environment with bond yields at historic lows) are the asset class more likely to provide positive returns in the future. Although stocks can be volatile, the risk of loss declines with time. “In the survey, women had consistently different attitudes and risk profiles than men when it came to their money. Most of the women in the survey – 62% – said that they are not prepared to take any risks with their money…and only 19% of women said they were comfortable investing directly in stocks.”  These risk-averse behaviours, such as holding more of their assets in cash versus their male counterparts, can choke off the potential of achieving returns necessary to live comfortably in retirement.

And finally, there is another – surprisingly rarely cited – reason that women need to improve their financial acumen. As primary caregivers, women are in an opportune position to pass on the fundamentals of money management to their children.  Readers may remember the October 2015 Nexus Notes article on teaching kids wealth management: “Parents do a disservice to children when they treat financial discussions as taboo, or send mixed signals if Mom and Dad are not on the same page of the money management textbook.”  It’s hard for Mom and Dad to be on the same page if Mom hasn’t yet read the textbook.

There is hope

All of this is not to say that women flat-out do it wrong. They do a lot of things right.  According to Jennifer Reynolds, President and CEO of Women in Capital Markets, women tend to take more time with their decisions, do more research and  have more conversations with their trusted advisors.  This all culminates in more informed decisions.

“The good news is that it’s a significantly different story for women who are more involved in their money: with clearer goals and a fuller knowledge of what they need, they are also more confident and optimistic about the future.”  The trick, then, is to bridge the knowledge gap.  On this, the article offers a few pointers:

  • Become engaged with your money
  • Make retirement a priority
  • Diversify your investments
  • Plan and seek advice

“…Even with lower incomes than men, women can achieve substantial financial health if they take a greater interest in their money,” and there is always time to gain knowledge.  Recognizing that you have a trusted resource to depend on – such as the financial counsellors and portfolio managers at Nexus – can make it easier to take that first step onto the path of learning.

1.BlackRock Global Investor Pulse Survey: Canadian Women Face “Gender Gap” in Retirement Planning and Investing.

More Like This...

See another CRM2 blog post that may be of interest to you.

CRM2: The Nexus Approach to our CRM2 Reports

Topic:
CRM2
Excerpt:
With changing securities regulations coming into effect, investment firms are now required to provide individual investors with specific additional in

More Like This...

See another Foundations & Endowments blog post that may be of interest to you.

Donor Advised Funds: An Overview

Topic:
Foundations & Endowments
Excerpt:
As we approach the end of the calendar year, taxes and charitable giving inevitably surface as ”things to do” in peoples’ minds. Here, we’d like to

More Like This...

See another Human Interest blog post that may be of interest to you.

COVID: An Uneven – and Unequal – Recovery

Topic:
Human Interest
Excerpt:
Canadians have had enough of the lockdown. Here we are 18 months after you first heard of the then mysterious Wuhan flu. Today, but for any curve ball

More Like This...

See another Inside Nexus blog post that may be of interest to you.

Walking Through Time: The History of Nexus

Topic:
Inside Nexus
Excerpt:
Bob Topp’s death last month triggered my memory “replay” button, likely as it did for many of us, whether as a long-time Nexus client, employee, or

More Like This...

See another Investments blog post that may be of interest to you.

Q&A From Our Quarterly Investment Review

Topic:
Investments
Excerpt:
Your Nexus investment team participates in many meetings where a company’s CEO or CFO presents to a group of investors. These meetings often have a

More Like This...

See another Pearls of Wisdom blog post that may be of interest to you.

“Work, Work, Work, Work, Work, Work”

Topic:
Pearls of Wisdom
Excerpt:
This has been a busy year. I’ve had lots happening on the home front (a wedding!) and lots going on at the office (too long to list!) Managing work

More Like This...

See another Tax Planning blog post that may be of interest to you.

The Great Transition – A Tax Efficient Withdrawal Strategy

Topic:
Tax Planning
Excerpt:
The change from “saver” to “spender” is what I call the great retirement transition. Figuring out how to draw on your retirement savings to meet your

More Like This...

See another Wealth Planning blog post that may be of interest to you.

Living to 100… Is 100 the New 80?

Topic:
Wealth Planning
Excerpt:
It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all

On a Side Note…

See another CRM2 Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Foundations & Endowments Nexus Notes Quarterly article that may be of interest to you.

Donor Advised Funds: An Overview

Topic:
Foundations & Endowments
Excerpt:
As we approach the end of the calendar year, taxes and charitable giving inevitably surface as ”things to do” in peoples’ minds. Here, we’d like to

On a Side Note…

See another Human Interest Nexus Notes Quarterly article that may be of interest to you.

COVID: An Uneven – and Unequal – Recovery

Topic:
Human Interest
Excerpt:
Canadians have had enough of the lockdown. Here we are 18 months after you first heard of the then mysterious Wuhan flu. Today, but for any curve ball

On a Side Note…

See another Inside Nexus Nexus Notes Quarterly article that may be of interest to you.

Walking Through Time: The History of Nexus

Topic:
Inside Nexus
Excerpt:
Bob Topp’s death last month triggered my memory “replay” button, likely as it did for many of us, whether as a long-time Nexus client, employee, or

On a Side Note…

See another Investments Nexus Notes Quarterly article that may be of interest to you.

The Future of Money: a Digital Currency Primer

Topic:
Investments
Excerpt:
As a bottom-up investment management firm, we spend a lot of time looking at specific companies. But keeping an eye on evolving industry trends can be

On a Side Note…

See another Pearls of Wisdom Nexus Notes Quarterly article that may be of interest to you.

A Table for None, Please; Working From Home on the Rise

Topic:
Pearls of Wisdom
Excerpt:
Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some

On a Side Note…

See another Tax Planning Nexus Notes Quarterly article that may be of interest to you.

The Great Transition – A Tax Efficient Withdrawal Strategy

Topic:
Tax Planning
Excerpt:
The change from “saver” to “spender” is what I call the great retirement transition. Figuring out how to draw on your retirement savings to meet your

On a Side Note…

See another Wealth Planning Nexus Notes Quarterly article that may be of interest to you.

Living to 100… Is 100 the New 80?

Topic:
Wealth Planning
Excerpt:
It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all