Knowledge is power: The gender investment gap is narrowing

Managing finances has historically been seen as a man’s job, leaving generations of women on the sidelines when it comes to investing and proactively planning for the future.

This trickle-down effect has created a large gap between the number of men and women who actively invest, and has created barriers to women’s financial wellness.

The tide is turning. As of 2023, 60% of women were investing in the stock market, and two-thirds (68%) were saving for retirement. Yet there is still a wide gap between current status and overall financial well-being—women’s investment account balances are 44% lower than men’s, partly due to the lack of income available for investing and the gender pay gap.

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the Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation points to the lack of encouragement for women to participate in the stock market as the main factor behind the investment gap. It points out that the lack of encouragement stems from the perception that women are less interested in finance and investing.

The cost of not participating in the stock market may put women at a severe financial disadvantage compared to men in the long run. 2024 Workplace Benefits Report The study shows that 53% of men currently feel in good or excellent financial health, compared to 36% of women who feel the same.

Women feel unable to invest effectively despite their high performance

Despite these challenges, women’s investment portfolios outperform men’s portfolios, according to a study conducted by Fidelity Investments in October 2023.Women exploit their great financial powerHowever, it has been noted that the reason behind women’s success may be their lack of confidence: 53% of women say they do nothing and wait for market fluctuations to pass, compared to 41% of men.

Women are less risk averse, and tend to buy stocks and hold them for the long term to wait out volatility. This is the golden rule of investing, yet women seem to use it only because they lack confidence in investing. Only 43% of women feel prepared to deal with future market declines, compared to 63% of men.

Although 68% of women are saving for retirement, only 52% of them feel knowledgeable about investing their savings to prepare for retirement.

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In fact, two of the top five financial concerns women face are due to a lack of knowledge and empowerment:

• 40% believe they should be doing more with their finances than they currently do.
• 39% worry about not being able to save enough money for retirement.
• 37% of women feel stressed about paying off debt.
• 29% are thinking about how to handle health care debt in retirement.
• 24% are concerned about how to invest their savings to achieve their financial goals.

Bridging the gap

Ensuring easy access to research, budgeting tools and financial planning advice is a sure way to increase financial interest and awareness among women.

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Theresa GreeneWomen can position themselves for financial success by staying vigilant about tracking their spending habits, says the certified financial expert and senior director of wealth management at Aspiriant. Knowing your monthly income and expenses provides the framework to create a realistic budget and work to prevent negative overspending.

Once you can understand what you can comfortably spend each month while living within your means, prioritize building an emergency fund to cover 3-6 months of living expenses and paying off high-interest debt before allocating money to investing in a diversified portfolio.

To address the investment and financial wellness gap, Greene suggests closing the knowledge gap within the finance sector first.

““The finance industry, and particularly the wealth management profession, has historically been largely male-dominated,” she added. “In addition, many advisors use complex jargon, both unintentionally and intentionally, to inflate their perceived level of expertise. These factors have deterred many women and minorities from joining the finance conversation.”

“At the same time, women and minorities are positioned to control a growing share of wealth in the United States. Women are expected to live longer than men. To close the knowledge gap, and ultimately the wealth gap, we need to start by increasing gender and racial diversity in the finance profession. If we can get past the jargon and complexity, everyone, male and female, will benefit greatly,” Greene added.

Data agree: less than 25% of women have a written financial planThose who don’t cite not knowing where to start or lack of information as a barrier. Fidelity also found that women feel empowered to start investing if they:

• There were no fees (31%)
• They had a clear checklist to get started (25%)
• They had a trusted source to make decisions and manage investments on their behalf (23%)
• They were able to speak to a trained financial advisor to help them meet their specific financial needs (22%)

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