The last year has clearly been a challenging time for many women, as concerns around financial stability have been brought into sharp focus. However, according to new consumer research from Nutmeg, one positive legacy of the pandemic is the significant shift in the attitudes and behaviours of women towards their money, and more importantly, their investments.
When it comes to investing, it’s well-reported that women make up a much smaller proportion of the investor base. Industry–wide data from Boring Money found that the online investing market in the UK comprises 36% female investors and 64% male. But with historically low interest rates offering cash savers very little in the way of interest and a growing focus emerging around creating financial buffers for unexpected events – are things changing? We recently polled 2,000 adults in the UK to better understand how they’re feeling about their finances, wealth and investments now compared to before the pandemic.
Doing your homework
The most common barriers to investing – a perception of not having enough money, not knowing where to start investing, and a lack of trust in the industry – are broadly aligned across the genders. However, in light of the pandemic, 43% of women have said creating a rainy-day fund is a key priority, while nearly one in five say they feel more confident dealing with money matters now. In addition, women are more likely to research the ways in which they can maximise their returns and more likely to research their different investment options.
Going it alone
When it comes to stock-picking, men are twice as likely as women to want to pick and manage their own investments (33% compared to 16%), and nearly three times more likely to take a risk on a speculative, stock–pick and invest in a particular company they’ve heard or read about. More broadly, some commentators have put the general rise in stock picking down to boredom amid lockdowns, and there have even been studies into the correlation between the pause in live sports in 2020 and therefore sports betting, and a rise in retail day-trading. It’s also a trend we’ve seen play out in recent weeks with the meme stocks rally, which has seen retail investors experience varying returns.
Why are more women engaging with investments?
As a result of lockdown restrictions many people have found that they have more savings than they have previously had. Our research found that 17% of women said they had more disposable income to invest than they did before the pandemic, with 14% of women wanting to diversify their investible assets and 12% said they saw greater opportunities for returns than in cash savings. Circumstances over the past year seem to be encouraging more women to start looking at investing.
Personally, I think there’s an additional, softer but still crucial element to this. Money has always been a great taboo in the UK, in fact, British adults would rather talk about relationships and sex than they would money and finances. However, in the last few years there has been a growth in money forums, bloggers, social media influencers and online communities all motivated to “normalise” talking about money, investing and financial planning. This growth in online communities has brought investing to an audience that may have previously thought that investing wasn’t for them.
Are women better investors?
While comfort around taking risks is low – just 3% of women said they have become more comfortable taking risks to get a good return, compared with 26% of men, Nutmeg data suggests that women typically take a more measured approach to market volatility than men. During major drawdown events, the data shows that women are around 25% less likely to withdraw their investments than men. Women are also less likely to change their risk profile on the platform amid volatility.
Where are women investing their money?
The consumer research is supported by our own customer data at Nutmeg, which shows an acceleration in new female investors since the pandemic: women accounted for 40% of new investors in 2020 compared to just 27% in 2016. At Nutmeg, we solely invest in exchange traded funds (ETFs) and while I wouldn’t definitively conclude that women are adopting ETFs at a faster rate based on a case study of one investment provider with over 100,000 investors, there are some interesting observations.
ETFs have a lot to offer female investors looking to build their rainy-day funds. They’re low cost, transparent and offer flexibility and choice. ETFs give investors the opportunity to own a share of businesses in an index – for example, the FTSE 100 – at a fraction of the cost of owning the shares directly. Unlike a unit trust, which trades at one set price point during the day, ETFs can be traded whenever the stock exchange is open. This makes them a flexible way of investing.
Investing in ETFs also makes it easier to diversify your portfolio. For example, buying an ETF that tracks the S&P 500 is comparable to buying a small part, in the appropriate proportion, of each of the index’s 500 companies – all at a much lower cost than would be feasible for an individual given the commissions charged for each trade.
Similarly, a typical corporate bond ETF would contain more than 200 individual bonds, so the default risk is highly diversified.
While this growing investment appetite from women is positive, we’re not at the end of the road yet. With these shifts in attitudes towards finances set to stay for the long term, the industry needs to act now to better address issues that are hindering further investment, such as confidence in money management and trust in the investment sector.
Risk warning: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A pension may not be right for everyone and tax rules may change in the future. If you are unsure if a pension is right for you, please seek financial advice.
- Boring Money, February 2021, Online Investing Report
- All stats unless otherwise stated are from fieldwork conducted by Opinium between 5th February – 9th February 2021 via an online survey, exploring the UK’s attitude to personal finances and investment in the wake of the Covid-19 pandemic. The sample is comprised of 2,000 UK adults, weighted to nationally representative criteria. Age groups surveyed are broken down into the following groupings: 18 – 24, 25 – 34, 35 – 44, 45 – 54, 55 – 64, 65 – 74, and 75 +.
- Nutmeg customer data, correct as at 31 December 2020.