If the Future is Female, Women Need to Invest in It Now

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In 2020, the gender pay gap found that women earned 81 cents for every dollar a man made, according to PayScale, and the year was particularly rough on women in the workforce as they left in droves to manage family matters during the global pandemic. The gender gap in investing is even more alarming; women continue to invest far less than their male counterparts. According to industry experts, women make up as little as 25 percent of investors on some platforms, up to about 40 percent on others, even as Robinhood and other investment companies seek greater gender balance as a means of significant and consistent growth.

Even though women comprise 51 percent of the U.S. population and serve as 40 percent of primary breadwinners—not to mention that they earn 57 percent of all bachelor’s degrees and nearly 60 percent of master’s degrees, according to Census data and the National Center for Education Statistics—women are not investing as much, as early or as often as men.

Based on salary data and market performance, the investing gap could cost women more than $1 million over the span of a 35-year career.

Where are all the women?

The shortage of women investors centers around a variety of both historical and current issues, including:

Women are more likely to put family first, career second. Traditionally, women stayed home to care for children or aging parents and, even if they did have careers outside the home, they often had fewer years of income to invest. More recently, about 2.2 million women left the workforce between February and October 2020, according to the National Women’s Law Center, disproportionately suffering from pandemic-related job losses. Less income equals less opportunity to invest.

Women save more and invest less. While statistics vary, pretty much every study reveals that women are more likely to put their money in more traditional savings vehicles than their male counterparts. A savings account will yield a measly 10 cents for every $100 deposited, based on FDIC data, which doesn’t even begin to cover inflation. On the other hand, the average annualized S&P 500 stock index return is nearly 10 percent over the past nine decades. A tendency to save more and invest less rarely pays off.

Back to the wage gap. Yes, earning 19 cents less on the dollar as compared to male workers means that women have less earned income to invest. The statistics are even worse for women of color. When you do the math, it’s clear to see that many women face reduced retirement income and Social Security benefits and a cloudier future based on those figures.

A recent study also showed that women tend to invest in more “contrarian” strategies, hoping that a beleaguered stock will come back, for instance, whereas male investors pursue more “momentum” investments, opting to buy the winners and sell losers. While one strategy is not necessarily better than the other, the study reveals that men tend to be more aggressive in choosing investments, which may be useful in the long run.

Turn investing into a habit 

Investing platforms and financial advisors alike are encouraging more women to make investing a regular habit, not a once-in-a-lifetime or rainy-day experience. This can start with finding a like-minded financial advisor, dabbling in the growing number of online investing options, and using stimulus checks or tax refunds to make investments in the future.

Many experts recommend that investors of all genders save about 15 percent of their income, if possible, including matching contributions from employers. It can be as simple as investing in a diverse mix of stocks and bonds and having the patience and presence of mind to hang on during dips in the market.

Wonder Women on the rise 

Fortunately, there is some good news when it comes to women and the world of investing. In 2020, several women-led funds—including Ark Innovation, Zevenbergen Growth and Alger Mid Cap Focus, among others—had outstanding years and more women are being recognized among the world’s best investors. If the next generation of investors is going to be younger and more diverse, women investors need to start growing their personal wealth now, rather than waiting for someday or the perfect conditions. Women are key decision makers for their families and control the vast majority of consumer purchases. Women own more businesses and women-controlled wealth is on the rise. And women tend to perform well when they do invest. Ultimately, women live about five years longer than men on average, so it is critical to make these significant investments for the future. As they say, “hindsight is 2020” and 2021 is a great time to look ahead and invest accordingly.

About the Author

If the Future is Female, Women Need to Invest in It Now

Kerry Corbit

Kerry Corbit is Investors Prism's Editor in Chief and Lead Broadcast Journalist and is based in New York, NY.