Women And Investing In 2023: Everything You Need To Know

Women have altered the investing landscape in a big way over the past couple decades. While the stereotype of the typical investor targeted by the investment industry might be a man, women’s wealth is growing – and so is their investing footprint.

The number of women investors is surging. A 2021 study by Fidelity found that 67 percent of women are now investing outside of their retirement accounts. In 2018, this number was just 44 percent.

These numbers are eye-opening considering the widening gender disparity brought on as a result of the pandemic. Women were disproportionately affected during the COVID-19 crisis, with 4.2 percent of women’s employment wiped out globally as a result of the pandemic compared to 3 percent of men’s employment, according to a 2021 report by the International Labour Organization.

Despite this, women have persevered. Since 2018, the global share of women’s wealth has increased significantly. Wealth manager Coutts says women’s income globally increased from $20 trillion in 2018 to $24 trillion in 2020.

So, while women have been late to the game and were disproportionately affected by the pandemic, they hold incredible potential and are poised to transform the investment landscape for the future.

Women and investing by the numbers

  • 46 percent of women cited money as having a negative impact on their mental health, compared to 38 percent of men, according to a 2022 Bankrate survey.
  • By 2030, women in America are expected to control much of the $30 trillion in financial assets that baby boomers possess today, according to McKinsey, a global management consulting firm, suggesting American women will inherit significant wealth.
  • There would be an extra $3.22 trillion of assets under management from private individuals if women invested at the same rate as men, a 2021 BNY Mellon study found.
  • Women are more likely to make investments that have positive impacts on society and the environment, BNY Mellon found. This would tack on an extra $1.87 trillion of additional inflows into socially responsible investments if women invested at the same rate as men.
  • A 2022 global survey from social trading and investment company eToro found that of the 9,500 female investors surveyed, 48 percent of them were new to markets over the past two years.
  • Fidelity says that half of women surveyed in 2021 were more interested in investing since the start of the pandemic.
  • Fidelity’s 2021 survey found that only 33 percent of women felt confident in their ability to make investment decisions, and only 42 percent felt confident in their ability to save for the long term, including retirement.
  • In 2020, almost 60 percent of women in the United States were solely responsible for making investment decisions and around 40 percent out-earned their husbands, according to State Street Global Advisors, an investment management company.

Are women better investors?

Women might still invest less than men, but they’re making serious headway. Women today control more investable capital, voting shares of stock and corporate board seats than ever before, according to Morgan Stanley. In 2022, women held 32 percent of S&P 500 company board seats, according to consulting firm Spencer Stuart.

  • Outperformance. A 2021 analysis by Fidelity of over 5 million customer accounts showed that women outperform men by an average of 40 basis points annually, or 0.4 percent, from 2011-2020.
  • Overconfidence leads some men to trade in excess, while women hold back. A study by University of California-Berkeley found that men traded 45 percent more than women did. The study states that in areas such as finance, men are more overconfident than women.
  • Women invest with purpose. A 2019 Money Crashers survey found that almost half (49 percent) of women rated a company’s social mission as extremely or very important to them, compared to just 29 percent of men.
  • Women showed more discipline. In a 2021 investor survey, Wells Fargo found that women tended to have a more disciplined approach to investing that may have helped them achieve better risk-adjusted returns.
  • Women took the right kind of risks. Wells Fargo’s study also stated that women are more risk-averse than men, but that it did not translate to lower returns. Their study actually found women achieved similar returns to men while taking significantly less investment risks.

Investing and the gender gap

Men invest at a larger scale than women, as evidenced by BNY Mellon’s findings that if women invested at the same rate as men there would be an extra $3.22 trillion of assets under management. Despite the tremendous gains women have made over the past decade in wealth and investing, the multi-trillion-dollar gap is still there.

A survey by online bank N26 showed that European women invest 29 percent less than their male counterparts – but that nearly 2 out of 3 wanted to invest more in 2022.

The investing gap compounds when taking race into consideration. A 2021 survey by CNBC and Momentive found that 59 percent of Black women do not own any investments, compared to 48 percent of Hispanic women and 34 percent of white women. To put it into perspective, only 23 percent of white men reported not being invested, compared to 42 percent of Black men and 38 percent of Hispanic men.

Ellevest, a robo-advising platform created primarily for women investors, claims there are three reasons the investment gap exists:

  • The financial sector was created by men and for men.
  • Women do not have as much extra money to invest as men.
  • Society conditions women to believe they’re not good with money.

Best ways for women to invest

A 2021 Fidelity study found that 64 percent of women would like to be more active in their finances (including investment decisions) and about the same percent of women (65 percent) would be more likely to invest or invest more if they simply had the clear steps to do so. Here’s how to get started:

  • Get someone to help you. Fidelity’s study found that a whopping 77 percent of women believe if they had a financial advisor to help them, they’d feel more confident about their financial future. No one knows about investing until they learn. A good place to start is your company’s 401(k) provider, which usually has advisors to get you started. You can also start with Bankrate’s tips to help you choose the right advisor for you or even get matched with a financial advisor in your area.
  • Go to a robo-advisor. If you want guidance on getting started investing but would prefer it not be face-to-face, try a robo-advisor. These digital advisors can create an entire portfolio for you based on your goals, investment time horizon and risk tolerance.
  • Do it yourself. You can begin investing on your own by starting small with one or two mutual funds or ETFs. If you haven’t already done so, starting a retirement investing plan should be a priority. A wise first step for an investment plan is to make sure you are contributing to retirement accounts for your future.

Learn how to invest in women-owned businesses

Women-led businesses are on the rise. According to a survey by payroll solutions platform Gusto, in 2021 women founded almost half (49 percent) of new businesses in the U.S., an increase from 28 percent in 2019. Women entrepreneurship is increasing, but globally only one in three businesses are owned by women, says the World Bank.

  • Gusto found that nearly half of the businesses started by women in 2020 (47 percent) were minority-owned.
  • Gusto’s research also shows that minority women were more than twice as likely to start a new business due to being laid off or because they were worried about their financial situations.
  • About a third of these women were even the sole income earners for their families.
  • In 2021, women-founded companies received only 2.3 percent of the total capital invested in venture capital-backed startups in the U.S., according to Pitchbook data.

Women-led firms are on the rise, but there is still one sector that has a lot of catching-up to do: venture capital. The Harvard Business Review (HBR) states that many studies have shown there is a strong gender bias in many elements of the venture capital pitch process. A 2014 study published in the Proceedings of the National Academy of Sciences found that although presenters with male and female voices delivered identical pitches, about 68 percent of venture firms chose to fund ventures pitched by a male voice. The researchers concluded that investors tend to prefer pitches by male entrepreneurs compared with pitches made by female entrepreneurs, even when the content is exactly the same.

That said, women invest in women, even in the venture world. Venture capital firms that have women partners will invest in startups with a woman on the executive team nearly three times more than that of venture firms with only male partners, according to research from Kauffman Fellows. Venture firms with women partners are also four times as likely to invest in companies with women CEOs.

One way to help circumvent this is to learn how to invest in women-owned startups and stocks directly.

Investing in women-owned stocks and startups

Venture capital has quite a way to go when it comes to investing in women-owned firms, but you can invest in women and their businesses in several ways.

  • Women-owned companies. While there’s no certain definition for what constitutes a woman-owned publicly traded company, investment platform Public says any publicly-traded company in the U.S. that demonstrates greater gender diversity within senior leadership than other firms in its sector can bear this title. One way to invest in them: The SPDR MSCI USA Gender Diversity ETF (SHE) is a fund that picks companies based on the MSCI USA Gender Diversity Select Index, which seeks to provide exposure to U.S. companies that promote gender diversity throughout all levels of their organizations.
  • Women-owned startups. Investing in women-led startups is an excellent option, given the success of women investors and business owners. In 2022, about 59 percent of small business-owning American women reported that their business was currently profitable, according to small business financing company Guidant.

Nearly anyone can invest in startups via crowdfunding sites. “iFundWomen” is a site that allows you to contribute funds for female-led startups. You can browse the different startups led by women and choose how much you want to contribute. You can even filter down further to businesses owned by Black and Latina women, among others. The U.S. Chamber of Commerce maintains a list of directories where people can learn how to support women-owned businesses.

Legendary female investors

  • Geraldine Weiss: After being told she was probably better off being a secretary, Weiss went on to become the first woman to launch a successful investment newsletter. The newsletter produced an average stock market gain of 11.8 percent from 1986 to early 2022, beating the Wilshire 5000 Total Market Index, the broadest measure of the U.S. stock market.
  • Muriel Siebert: Known as “The First Woman of Finance,” Siebert was the first woman to become a member of the New York Stock Exchange. Siebert also became the first woman superintendent of banking for New York State.
  • Abby Joseph Cohen: Retired partner for Goldman Sachs and now a professor, Cohen is one of the top market analysts in the country and made a name for herself predicting the bull market of the 1990s.
  • Mellody Hobson: Once named as one of Fortune’s most influential women, Hobson has served on the board of JPMorgan Chase and Starbucks. She currently serves as President and Co-CEO of Ariel Investments, where she launched Project Black, an initiative investing in Black- and Latino-owned companies.
  • Abigail Johnson: Johnson, a billionaire, is the chair and CEO of Fidelity Investments.

FAQs

    • While there are many different investments to choose from, one of the best investments anyone can make is in a low-cost S&P 500 index fund. These funds provide instant diversification benefits at almost no cost and allow investors to participate in the growth of the largest U.S. companies. Over the long-term an investment in this type of fund has returned about 10 percent annually.
    • One of the most famous female investors today is the controversial Cathie Wood, founder and CEO of investment management firm Ark Invest. Wood’s funds performed extremely well during the speculative boom of 2020, with her Ark Innovation ETF increasing more than 150 percent that year. But rising interest rates sent many of her favorite stocks plummeting in 2022, with the Ark Innovation ETF dropping by nearly 70 percent. Several professional investors have criticized her investment reasoning, but she’s maintained her positive outlook for the companies the funds hold.

    • Before diving into the investment world, beginners should determine their own risk tolerance, or their ability and willingness to take risk. Risk averse investors might be better off with fixed-income investments such as bonds or money-market funds, while investors with a higher risk tolerance can consider investing in the stock market. Index funds are a great way to get started with investing because of their low costs and diversification benefits.
    • Investing is important because it’s the best way to achieve long-term goals such as retirement or building wealth. Saving is important, but saving by itself likely won’t be enough to help you reach your financial goals. Investing will help you maintain your purchasing power over time and outpace the rate of inflation. The earlier you start investing, the more time your money will have to compound and grow.

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