More Than Half of Women Are Not Investing: What’s Holding Them Back?

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Although women have proven to be successful investors, more than half of them are not investing. A GOBankingRates survey of over 1,000 women ranging in age from 18 to over 65 found that 57% of women are not actively investing.

The survey identified several barriers to women investing. These include:

  • Lack of money (33%)
  • Lack of knowledge about how to invest (10%)
  • A combination of both (14%)

The Income Problem

One of the largest barriers to women investing is the perception of how much money is actually needed to get started. A separate study conducted by leading global asset manager BNY Mellon found that on average and globally, women believe they need $4,092 of disposable income each month before they could even consider investing any of it. That’s almost a whopping $50,000 a year in disposable income, meaning extra money irrespective of the main expenses of a household. In the U.S., this number was found to be even higher, with women believing they need over $6,000 of monthly disposable income (an eye-watering $72,000 a year) in extra income before they would consider investing.

The disconnect is clear. Despite widely held beliefs that you need a lot of money to make money, this is simply not true — fortunate news for women who are wary of investing. The BNY study cites an example that if you began 10 years ago investing $30 a month in the S&P 500 Index, your portfolio would be worth over $8,000 today, of which less than half would be your own contributions.

How does this work? Compound interest. While many women are under the impression that abundance is the name of the game,consistency and moderation are actually far more important. Small amounts of money contributed over a long period of time is a proven investment strategy — regardless of how much disposable income you might think you need. Particularly since this barrier to investment entry is perhaps the easiest to overcome, women can start as small as they’d like to slowly start becoming more comfortable investing.

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The Knowledge Problem

In total, 24% of the women surveyed by GOBankingRates felt that a lack of knowledge is holding them back from investing — and this isn’t entirely their fault. BNY reported that the investment industry is failing to reach, appeal to and engage women to the same degree as men.

Further, across key aspects of financial decision-making, investment is actually the area where the fewest women feel confident compared to making decisions around savings, property and pensions, the BNY study found. There is disparity around the globe as to how confident women feel, but the knowledge and confidence relationship is clear.

In India, where confidence is highest for investing among women, BNY’s data showed that there are more conversations taking place around investing. Half of the Indian women in the study said their parents educated them on investing, compared to “an average of just 32% of women across all markets and just 12% in Japan, where levels of investment confidence are lowest.”

Misplaced Risk Aversion

BNY’s survey identified another factor that could be holding women back from investing. The survey found that just 9% of women have a high risk tolerance, but a higher risk appetite is not necessary to invest. The problem is more communicative in nature, as the investment firm says, “misperceptions of this risk level are deterring women from investing.”

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BNY adds that work needs to be done by the industry to better communicate the risks and rewards of investments, specifically in the context of missed potential opportunities. This means that there could be more risk in not investing than there is in getting involved in the market. A whopping 45% of women surveyed by BNY said that investing money in the stock market, be it directly or through a fund, is simply too risky for them. Almost half of women surveyed by BNY, 49%, have a moderate risk tolerance, while 42% responded with a low risk tolerance.

All investing comes with risk, but the knowledge disconnect is the belief that all investing is high-risk. It’s crucial to understand that keeping money in cash can also be a risk — especially now. Due to high inflation, money in cash is money lost, plain and simple. Just as there are high-risk investments, there are also lower-risk investments that are logically better positions than cash. These can include certain bond funds, commodities, and utilities and energy stocks, among others.

A Problem for All

Women’s aversion to investing is not just a drawback for the women who choose not to invest. The BNY study found that if women invested at the same rate as men, there would be at least an extra whopping $3.22 trillion of assets under management from private individuals today. This means more money, and returns, for all investors — men included.

More importantly, research also shows that women are more likely to make investments that have positive impacts on both the environment and society as a whole. BNY found that women are more interested in making investments that align with their personal values and have positive societal impacts.

This makes the overall solution much more crucial. Not only will women investors bring higher rates of return and overall volume to investment markets, but more money from women investors will also increase investments with a purpose — and be a betterment to society as a whole.

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Gabrielle Olya contributed to the reporting for this article.


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