There is a new epidemic that is costing women thousands, if not millions, of pounds every year: chronic underinvestment in the stock market. Around 80% of women do not have an investment portfolio, compared to 66% of men, according to a recent study by investment platform TD Direct.
We all know the stats about the gender pay gap, but the gender investment and pension gaps are costing us far more over the course of our lives, according to Sallie Krawcheck, the American cofounder and CEO of Ellevest, the only women-focused investment platform.
“We can’t make the market go up but we can actively make the decision to invest,” she said. “If you want a pay raise, your boss has to decide if that should happen. Investing is an action you can take on your own.”
So why aren’t we getting more involved? Dame Helena Morrissey, head of personal investing at Legal & General Investment Management (LGIM) and former CEO of Newton Investment Management, said women are put off by “perceived barriers” such as sales jargon and the feeling they should do thorough research before investing.
“All the evidence suggests men feel more financially confident, but that doesn’t mean they are better at it or more knowledgeable, they just go for it even if they don’t particularly understand,” she said. “That’s not a recipe for success either.”
Nobody can guess the future of the market. But the FTSE 100, which is composed of the largest companies listed on the London Stock Exchange, has gone up more than 600% since 1984, and that includes the tech bubble of the early 2000s and the financial crisis of 2008.
In other words, keeping your money in your current account won’t make it grow. It will only reduce in value as inflation rises. As women live longer, millennials look wistfully at state pensions, and house prices wobble, managing your finances is becoming more important.
Amy, 33, a digital strategist, said she started investing a year ago after realising her workplace auto-enrolment scheme wouldn’t get her much for retirement, even on a salary of £60,000.
“I've heard a lot of horror stories and I want to be comfortable in old age,” she said. “I'd also managed, finally, to pay off my student debt and my overdraft, as well as build up a small buffer. It felt like it was the natural next step.”
Amy started investing £10 a week via the Moneybox app into a stocks and shares ISA, and she also invests £100 a month into a self-invested personal pension (SIPP).
Dame Morrissey explained that the earlier we get into the habit of saving and investing – even small amounts – the better.
“We have to stop thinking that we have to save up thousands of pounds before we can invest,” she said. “Many companies have a very low minimum; you can invest £50 a month or even just your spare change after buying a coffee.”
An increasing number of companies, including LGIM, are racing to market with a combination of money apps and online portfolios. Companies like Nutmeg and ETFmatic ask new clients to fill in a questionnaire to find out your risk profile, and will allocate your money to a suitable portfolio. You can log on to your account at any time and check on how the portfolio is doing.
If you have more knowledge and time to research, you can also pick your own individual funds and create your own portfolio.
Ellie Sluys, 34, communications manager at Saracen Fund Managers, invested £20,000 in a stocks and shares ISA after deciding to delay buying a house as she was concerned about Brexit.
“My worry about putting it into funds is that the market has done so well in the last year – could it continue going up?” she said. “I looked for low-risk options, and I made sure to spread the money out across different funds and put a small amount into higher risk funds.”
She added: “Even for those who have no experience, it’s pretty straightforward and you might be surprised how much of a buzz you get from watching your funds slowly gain a tiny bit here and there.”
Fiona, 34, who works in crisis management and PR for a fund management company, bought a house in London before the referendum. She then put about £15,000 into quite risky funds that invest in more exotic frontier markets, and so-called specialist active managers.
“I’m only 34 so I want to get the upside from this end of the market while I can. I’ll go into more core areas as I age,” she explained.
Fiona also has about £5,000 in cash reserves and £13,000 in stocks from her former employer’s share schemes. She uses Hargreaves Lansdown as her platform and checks up on it every six months, and is now searching for a female financial adviser to work out her long-term goals.
Another option is to invest in stocks directly, rather than funds. It makes for exciting dinner party chat, but it’s a riskier game. Emma, 30, a journalist, invested a modest sum in a UK drinks company when the stock price was £4.50. Every share she purchased is now worth around £25.
“I will never replicate such success and annoyingly, I only put a few hundred quid in,” she said. “I then invested in three other stocks which haven't done as well. One is down versus my original investment.”
Despite the mixed bag of success, Emma said she would continue to pick out individual companies, but only if she had enough conviction in their future.
Emma also invests in a couple of passive funds, which simply track a market benchmark like the FTSE 100 or the US equivalent, the S&P 500. If the benchmark goes up, so will your money, and vice versa. These funds are called Exchange Traded Funds or index-tracking funds and are used by companies like Ellevest and Nutmeg to make up clients’ portfolios. Krawcheck argued that not only are passive funds cheaper than hiring an active fund manager, but also that less than 1% of active funds in the US – the world’s largest market – have consistently outperformed in the last 15 years.
Julia, a 28-year-old journalist, also chose to go down the passive fund route when she started investing as a hobby at the age of 24. She started with a stocks and shares ISA, investing £50 a month into passive funds that invest all over the world in European, Japanese, American, UK and emerging market – like Chinese, Brazilian and Indian – companies. She now has over £4,000 invested, almost £1,000 of which is profit.
“I have no idea whether that’s good compared to the market average but it’s a whole lot better than my return on cash savings,” she said. “I ultimately go by the principle that it's best to get broad exposure, and I do this by investing in different regions and paying a small amount regularly into the ISA. I also consider the stocks and shares ISA as part of a wider savings portfolio which includes a lot of cash, so I'm OK with taking some risks.”
Capital markets have had a tough time lately, with the FTSE 100 falling the most in one day since the EU referendum. (Investors appear nervous that the US may raise interest rates, which affect the rest of the world’s economy.) However, none of the women investors Refinery29 spoke to plan to yank their cash.
“I've learned to wait it out, rather than panic-sell and crystallise a loss,” said Emma.
There is, after all, one very good reason to stay invested.
“Because women can have more money and money is power,” said Krawcheck. “Men have more power. We will not be equal with men until we have as much money as they do.”
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