When it comes to investing, are women investors more risk-averse than men?
What Is Risk?
Risk is the possibility that something adverse will happen. In the case of investing, this usually means losing money.
Research on the Gender Gap in Attitudes To Risk
There have been multiple studies in the area of behavioural finance which have examined the behaviour of men and women when it comes to investing and risk.
“Studies consistently show women to be more wary of risk than men when it comes to their finances. This can be a good thing at times, protecting them from overconfidence and making reckless moves that lead to capital losses. But over the long term it can constrain returns if, for example, they steer clear of proven, though potentially risky, assets like stocks.“
Source: The Gender Investment Gap: How to overcome the factors that keep women from achieving financial independence, Fidelity Canada
According to Forbes, “while they do take on less risk than men when it comes to investing, that doesn’t mean they’re risk averse. Rather, they’re simply more likely to take on appropriate levels of risk with their investments than men. Both of these findings make for better investing outcomes.” Source: Why Women are Better Investors, Forbes Advisor.
In the Blackrock Investor Pulse Survey 2023, they found 57% of those surveyed were not investing. Of those non-investors, 31% of women compared to 27% of men were afraid that they would lose everything. The global average was 27%.
However, they also found that a greater percentage of women (32% vs 28% of men) want to try investing with a low money commitment.
So, there is a greater willingness on the part of women to start investing but with small amounts of money as women were more afraid of men that they would lose everything they had invested.
Factors Influencing Investing Behaviour
When it comes to investing, you will have your own unique approach which is influenced by various factors. Your gender is only one of those factors.
Studies suggest that risk tolerance is not solely determined by your gender, but other elements such as age, income level, education, and life stage.
Empowering Women, Breaking Barriers and Building Confidence
To address the gender investment gap and empower women investors, it is important to:
- challenge stereotypes
- promote financial education
- create mentorship programmes for women
- increase representation of women in the investment industry
In Summary
Gender is only one of many factors influencing risk tolerance when it comes to investing.
While research suggests women tend to be more cautious about risk, this doesn’t necessarily mean they are risk averse. Rather, women tend to take a more balanced approach to investing.
Women could become more emboldened investors by empowering themselves through education and representation in the investment industry.
This is all part of women taking charge of their money.
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