The Gender Gap in Investing Needs To Go

I’m constantly in awe of the brilliant and talented women who have enveloped my life.

My mother is working on her third degree. My sister is studying Ashtanga yoga in Mysore, India. My friends are earning PhDs, starting clothing lines, saving lives, and making music. I have the distinct privilege of working alongside innovative women on a daily basis at both of my jobs. I’m ever grateful to read all of the unique and inspiring writing in our female personal finance blogging community.

Despite all our successes, there is still an underlying lack of financial confidence. It’s a mindset many professional women have successfully overcome in the workplace, but don’t maintain once we’re compensated. Once paychecks hit our savings accounts, our money tends to hang out longer than our male colleagues’. Our hard-earned dollars collect dust, actually decreasing in value when the rate of inflation is factored in. Why? Many women are intimidated by investing.

A Look at the Numbers

A recent Prudential study uncovered that although 75% of women feel having enough savings to maintain their lifestyle in retirement is essential, only 14% feel confident they can make this happen. With women predicted to live longer than ever and potentially without a partner for a portion of their golden years, outliving retirement savings has become a more pressing concern.

Although financial advisors have agreed that gender can cause a distraction in financial planning and clients’ goals should be looked at objectively, the gender gap in investing still exists.

A recent Merrill Lynch study found the most striking disparity between men and women is their perceived level of financial knowledge. More than half of female respondents agreed with a statement saying they know “less than the average investor about financial markets and investing in general.”

Only a quarter of men agreed with this statement.

Despite this unfounded lack of confidence, the same study highlights the fact that nearly equal percentages of men and women (roughly half of respondents) confirmed “they personally wanted to take part in making changes to their investment approach.”

This dispels any dated stereotypes claiming women simply aren’t as interested in investing, yet the confidence gap even extends to the financial services industry. Did you know that women only represent 30% of US financial advisors and only 23% of certified financial planners? With higher percentages of educated female breadwinners than ever before, how does the gender gap in investing still exist?

Getting Started with Investing

For most of my twenties, my retirement savings resided in a target-date fund that was recommended to me by an advisor (read: salesman) at Fidelity. I wasn’t knowledgeable enough to know which questions I should be asking, so I wasn’t prepared to question the product that was offered to me.

For the record, target-date funds can be an attractive starting point for investors with limited knowledge and prefer a hands off strategy. These funds automatically reallocate their mix of stocks, bonds, and cash equivalents depending on what year the investor plans to retire.

Once I started doing my own research, I realized there were cheaper options available and made the leap to Vanguard. While I was still learning about my options, I knew I desired a more active approach.

My selections were actually based on Vanguard’s target-date funds: 60% in Vanguard’s Total Stock Market Fund Admiral Shares (VTSAX) and 40% in Vanguard’s Total International Stock Index Fund Admiral Shares (VTIAX). I skipped their suggested 10% allocation in bonds. Cheap and simple.

The Next Steps

I knew maxing out my Roth IRA at $5,500 per year wasn’t enough, but I didn’t have access to an employer sponsored 401(k). I soon opened a taxable investment account and began funneling additional savings in there.

I continued purchasing low-cost index funds, but I wanted to begin experimenting with dividend growth stocks, as well. I had no intentions of trying to time the market; my goal was purchasing companies I planned to hold onto long-term. I started by exploring the S&P 500 Dividend Aristocrats.

For me, the key to investing has been exploring the territory on my own terms. And I’ve certainly made my share of mistakes, *ahem* jumping on a “hot stock tip” from a professional comedian, but I’d like to think my decisions are more informed now.

Looking Ahead

Women have many financial strengths. In addition to saving a higher percentage of our earnings, we are responsible for the majority of domestic financial decisions in our households. While we tend to regret fewer financial decisions, we aren’t always comfortable with the risks associated with investing. Let’s find ways to close the gender gap in investing through conversation, education, and experience — on our own terms.

Readers: Do you think the gender gap in investing exists? If so, what can be done to make changes?

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Discussions — 10 Responses

  • JC February 18, 2015 on 6:32 am

    I think knowledge is still the key here. I would guess that the biggest reason that women, in general, don’t invest or feel confident investing is because they don’t seek out the knowledge fearing that it’s too complicated. But is that really any worse than a lot of men who just go on and invest without learning about companies or knowing much about investing?

    Reply
  • Melanie @ Dear Debt February 18, 2015 on 1:21 pm

    I think the language surrounding investing is very jargon-ish and male-centered. I mean, come on, bulls, bears, etc. We equate investing with characters in Wolf of Wall Street. I don’t think we’ve seen enough role models to show us the way. I can admit my own ignorance gap and learning curve, but I’m committed to overcome it.

    Reply
  • Karen February 20, 2015 on 6:55 pm

    I definitely think there is a gender gap when it comes to investing. I actually just posted a collaborative post from other bloggers about women and investing.

    I think education, awareness, promotion and just getting the message out there helps. It’s funny because my fiance is more invested in a rental property, whereas I am the one who does the investing with stocks and ETFs.

    Reply
  • Frugal Articles of the Week - Frugaling February 21, 2015 on 6:47 am

    […] The Gender Gap in investing needs to go by Kate Dore Last, but certainly not least, is an article from one of my favorite personal finance writers. In her latest post, she details the many reasons why the Gender Gap in investments is a serious problem for everyone. From stats about financial knowledge/literacy to information about how to change that, Kate is an awesome example! […]

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  • Stefanie @ The Broke and Beautiful Life February 21, 2015 on 7:24 am

    I’d like to see a little more relevant money coverage in major women’s magazines. Money, beyond “how to save on beauty products”, needs to become AT LEAST as mainstream as sex.

    Reply
  • Marissa @Thirysixmonths February 22, 2015 on 6:01 pm

    I did an interview for a major newspaper in Canada about my investing habits because it was a such a novelty to have women actively paying attention to their money. It’s actually really disheartening to talk to really intelligent friends who don’t feel comfortable being active in the markets.

    Reply
  • Shannon @ Financially Blonde February 23, 2015 on 9:58 am

    I think like Melanie stated, the problem is that the investing lingo and community is so male-centric that women feel as though it’s a completely different language that they can’t understand. It’s also a highly regulated industry, so it’s hard to create special material for one gender over another. That being said, I think the finance community could do a better job of making it more accessible and less intimidating for women.

    Reply
  • Mel February 27, 2015 on 10:20 pm

    I actually love my target date fund because of how intimidating I find investing to be. I feel a little more secure in that investment, and as long as I’m maxing it out each yet, it makes me feel more secure in selecting other stocks and a wider variety of funds in my 401(k) or any other investments I make.

    Reply
  • Scott March 14, 2015 on 9:41 pm

    Kate,

    Excellent post. And, it’s even more important for women to become comfortable with finances because they tend to live longer than men. So historically not only would women not be as experienced, but then be thrust into managing an estate by themselves. (Maybe the reason for the predatorial financial advisors and resultant mistrust?)

    The women I work with and my friends (I’m 31) are all very financially independent, so I think this mindset is already starting to change. I don’t pay too much attention to financial marketing, but any evidence of the advertising focus starting to shift this direction? If not, it would be a great growth market for the brokers.

    And, I think that, regardless of gender, there needs to be a change in financial literacy within the US. Having a mandatory financial class in school might be a good way to go about this. Things like that were not around when I was in school so fortunately my parents did a job of explaining things.

    Keep up the good work!

    Scott

    Reply
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    […] The Gender Gap in Investing Needs To Go […]

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