Fourteen years ago, I edited a magazine for investors. I took over the job from another woman, many of the journalists I commissioned were women, and most of the press officers I spoke to were women. But when it came to the fund managers we interviewed, almost all were men. The readership, too, was overwhelmingly male. Women clearly understood how the stock market worked; they just weren’t investing in it themselves.
An adage in the financial sector goes that women save and men invest – and this still rings true. It seems that even women who have money to put aside tend to squirrel it away rather than try to grow it. In 2015/16, the last year for which data is available, 892,000 women invested in the government’s stocks and shares Isas (which allow you to invest up to a fixed amount with potential tax-free returns) as against 1.1 million men. In contrast, when it comes to much safer cash Isas, 5.2 million women invested in the same year against 4.4 million men.
The rise in the number of women’s personal money diaries published in print and online are proof of a growing fascination with how much women earn, spend and (if they are lucky) invest or save. This year, too, a raft of financially savvy women will be publishing books about women’s financial security. And numerous seminars, websites and podcasts are aimed specifically at potential female investors who want to dip a toe in the stock market. Even the Guides are being encouraged to think about the subject, with the launch of the Saver badge last year.
Yet at Interactive Investor, an online service where you can research and buy shares and funds, only 28% of the customers are women. At Wealthsimple, another online investment service, which has been hosting events targeting women, the figure is 33%. “There’s so much publicity around the gender pay gap, but the gender investment gap is also really important to solve if women are going to be in more control of their financial wellbeing and have choices in life,” says Helena Morrissey, head of personal investing at Legal & General Investment Management, and one of a handful of woman at the top of the investment industry. So how do you make a start?
What do you need to know?
The first thing you need is a change of mindset. Women’s dependence on savings accounts, says Morrissey, is “recklessly cautious”. With that in mind, a financial adviser is a good place to start, but it will cost you. You can find a local adviser using unbiased.co.uk, and many advisers offer a first appointment for free, but you will need to pay for further advice.
If paying for advice is not an option, there are many websites specifically to help women make the most of our money. Sarah Pennells set up the Savvy Woman website nine years ago when she “couldn’t find a website that talked about money – particularly around investing and pensions – that was aimed at someone like me”. She says that while women tend to be very risk aware, this not necessarily a bad thing. “I do believe the industry has been rubbish at explaining risk in the past and that’s one reason why women feel less comfortable investing,” she says.
Emma Maslin founded her website, the Money Whisperer to “bridge the financial literacy gap” between genders. The way money has been talked about online has typically been split, she says: “Women blog about being thrifty and frugal and men talk about investing and growing their wealth.” A good way to start is thinking about what you would do if someone gave you £50, she says.
“I wouldn’t go out and use loads of coupons and try to make it go as far as possible., I would think: ‘What can I do with £50, what can I grow it into?’”
Emilie Bellet set up the weekly newsletter Vestpod three years ago, after working in private equity, including a stint at Lehman Brothers. She wanted to “try to talk about money in a different way – an inspiring way. When I was working in finance, I noticed that when men talked about their investments, they talked about the companies they liked and their returns. Women are looking more at where we want to be in 10, 20 or 30 years’ time.”
Alongside the newsletter, Bellet now runs workshops and events targeted at women. One of the most popular is an introduction to investing, covering everything from how much you need to where you can make the investments. “Historically, we have been managing the household finances but men have made the final decisions,” Bellet says. “We need to take a seat at the table and manage our own finances.”
How much money do you need?
Bellet acknowledges that there are barriers that come from the continued gender pay gap, and from the fact that women are still more likely to take a career break or work part-time. “Because we have less money, we prefer to hold some in cash, so we’ve got an emergency fund if we need it.” That is not a bad idea, but it may not take as much as you think to start investing – she believes a regular payment of £25 a month is enough to get you started. Investing on a monthly basis, rather than putting in a lump sum, helps you spread your risk. When the stock market is doing badly, you get more shares for your money – good news when it, hopefully, bounces back.
Investing in shares in a single company, or just a handful, is a high-risk strategy, whereas a fund will pool your money with other people’s before investing, so your money will be spread across a large number of shares.
A basic tracker fund can be a good starting point. These follow the performance of a stock market, for example the FTSE all-share index, so offer an easy-to-follow investment in companies you have heard of. Look for low fees, so if you can invest only a small amount it will not all disappear before it reaches the stock market. Many online services offer a readymade portfolio of investments – you decide how much risk you can afford to take and they will pick you a suitable range of investments. As a rule of thumb, the sooner you need the money, the less risk you should take. Holding the investments in a stocks and shares Isa will mean you won’t need to pay tax on the returns.
When is a good time to start?
Right now. There is plenty of advice around. As Bellet says, more women than ever are writing about money. Her own book, You’re Not Broke, You’re Pre Rich, is due to hit the shelves in May. Another, by Otegha Uwagba, is coming in 2020. Uwagba says she hopes her book, We Need to Talk About Money, will be “the jumping off point for a generation of women to begin having the long overdue conversations about money we’re all so desperate to have”. The best way to invest is with monthly payments so there is no need to wait until you have a lump sum.
What will I get out of it?
When women do invest, they have been shown to do a better job than men. Last year, a study by Warwick Business School looked at the men and women who traded shares and funds using Barclays’ Smart Investor service. The study found that the annual return made by men who invested on the site was just 0.14% above the FTSE 100, while women using the service made an average annual gain 1.94% above the FTSE.
Moira O’Neill, head of personal finance at Interactive Investor, says men are more likely to favour the higher-risk world of stocks in small companies on the Aim market – a sub-market of the London stock exchange – while women, with their traditionally cautious approach, are more likely to chose FTSE 100 shares. “While familiarity might be a driver, cold hard stats could equally be winning the argument,” she says. “The FTSE 100 has trounced the Aim market, which needs particularly careful stock selection.”
And if you need convincing, consider this: if you had invested £1 in the FTSE 250 10 years ago, it would now have grown to £2.53, once inflation is taken into account, according to figures from investment firm Hargreaves Lansdown. Meanwhile, had you put £1 into an instant access account, it would be worth 87p after inflation.
