4 traits that give female investors an edge

We recently learned about gender pay gaps among Australian companies. And the results were pretty ordinary. 

Across 5,000-plus private sector employers, 50% of firms pay their male workers over 9% more than their female staff, according to the Workplace Gender Equality Agency (WGEA).

Nationally, the median gender pay gap stands at 19%. Over the course of a year, that gap grows to an $18,461 chasm. 

However, the gender pay gap isn’t just about fairness. It also affects women’s ability to achieve financial security, and it has led to a gender gap in investing. The latest ASX Australian Investor Study found that male investors in Australia outnumber women 58% to 42%.

But women are closing the gap. More than 10 million Aussie women currently own investments outside of their home and super, up from nine million in 2020, according to the ASX study. 

The four traits that give female investors an edge

What’s interesting is that research continually suggests women have the key traits needed to enjoy long-term investment success. 

I put this theory to the test with the help of InvestSMART’s Portfolio Manager data. I should stress the data used was very general with no access to personal details other than gender, so these are broad observations. Nonetheless, a few findings stood out: 

1. Women are more likely than men to identify as ‘conservative’ investors 

Broadly speaking, women gravitate to a lower level of risk, and are more likely to opt for a conservative asset allocation. Men, on the other hand, are comfortable with a higher level of risk. This really shines through in the way men typically have a far greater proportion of their portfolio in shares, while women have a considerably bigger chunk of their money invested in cash. 

2. Women use managed funds more than men 

While women may not be as comfortable picking their own shares, they don’t bypass equities altogether. 

Female investors are twice as likely as men to hold units in managed funds – this includes exchange-traded funds (ETFs), many of which focus on shares. This suggests women prefer to seek professional help or entrust part of their portfolio to experts.

Is that a bad thing? Not at all. As long as a fund charges low fees and has a track record of healthy long-term returns, they can be a great way to add diversity to a portfolio.

3. Women have more diverse portfolios 

Women typically spread their portfolio across a wider variety of asset classes than men. This greater diversification can mean lower volatility, which reduces the temptation to jump ship if one particular investment market hits a rough patch. 

4. Women trade less frequently 

Female investors are more likely than their male counterparts to take a ‘buy and hold’ approach, and have a long-term focus. That matters because frequent trading may be fantastic for brokers, but it’s not so good for portfolios.  

Overtrading often does little more than rack up unnecessary buy/sell costs, crystallise losses and/or capital gains tax, and it can leave investors sitting on the sidelines when market upswings occur.  

If you’re not convinced about the merits of passive versus active investing, consider SPIVA research that confirms an overwhelming percentage of actively managed funds fail to beat the market. The results show that over the 10 years to the end of December 2023, 83.33% of Australian equity general funds underperformed the S&P/ASX 200.

Tips to get started 

Sure, women can face financial challenges. However, females often have innate qualities that can drive success as an investor, even outperforming men on long-term returns. The Fidelity Investments’ 2021 Women and Investing Study found that over 10 years, on average, women outperformed their male counterparts by 40 basis points or 0.4%.

Why let all that natural talent go to waste? Here are a few tips for women (and men) to get started: 

• You don’t need to be wealthy to grow wealth. As little as $500 can get you started in ETFs or shares listed on the ASX. From there you can steadily add to your portfolio over time. 
• Think about risk and your investment timeframe. Knowing how you feel about risk and how long you plan to invest for can go a long way to determining the investments best suited to your goals. 
• ETFs are a handy option. For diversity, low fees and simplicity it’s hard to go past ETFs.
• Start today. If you can, start investing as early as possible to harness the power of compounding. That said, it's never too late to begin. Every day you are investing is an extra day of making your money work hard for you. 

Above all, you don’t have to be an expert to grow a rewarding portfolio of investments. There are plenty of great resources available to help you get up to speed. The government’s Moneysmart website is packed with free information, or take a look at learning programs such as InvestSMART’s Bootcamp.