It may be considered a cliché – the more level-headed, considered approach of women counter-balancing the more adventurous or wilful attitudes of the male ego – but when it comes to investing, is there actually strong evidence to support the theory? We examined our own data to test it out.
When you join Nutmeg, you select a risk propensity for your investment, ranging from 1 (cautious) to 10 (aggressive). You can set up a number of pots, each with a different level of risk you’d like to take. We find that a lot of our customers do this, so they can segment their savings for different purposes.
So, you’d think these risk settings would average out over time and across all demographics, right? Not at all. Based on a recent analysis of our customer data, there are fascinating variances in the levels of risk people take, especially between men and women and between age groups.
Men seek greater returns at higher risk
We consistently see that our male customers adopt a far more aggressive attitude to risk than women. Proportionally, a higher percentage of female investors select risk levels 1 to 5 than their male counterparts, while a higher percentage of male investors opt for risk levels 6-10.
More specifically, over half (55%) of women choose to stay in the medium-risk zone (levels 4-6), compared to 41% of men. And only a third (33%) of women venture into the higher-risk end of the spectrum, compared to nearly half (48%) of men.
When you look at the actual amounts invested by men and women in medium risk versus high risk portfolios, the gender gap widens even further. The majority (64%) of ‘female investments’ are in the medium-risk zone (levels 4-6) compared to just 43% of ‘male investments’. Meanwhile, there are only a quarter (27%) of ‘female investments’ in the higher-risk portfolios but almost half (48%) of all ‘male investments’ at Nutmeg reside there.
It’s reasonable to assume that the risk levels we see customers select are a fair reflection of their attitudes towards risk and return. In part, that’s certainly true. But when it comes to investing, it’s important to realise that risk is not simply a character trait. Understanding risk is an essential part of your investment decisions and the level of risk you take with your investments should be carefully considered and tailored to your personal financial goals – how long you want to invest for, your future family and life plans, the income you expect to earn during that period, and so on.
A high-risk approach may well be the strategy that best fits your goals, particularly if you’re looking to make returns over a long timeframe and can ride out short-term market dips in order to take advantage of the long-term market rises. So, high risk in investment parlance doesn’t mean cavalier and wilful.
Now, whether or not that line of argument would smooth over a domestic disagreement on the household spending… well, that’s another matter altogether.
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. Past or future performance indicators are not a reliable indicator of future performance.
Data source: Based on Nutmeg customer data