9 Aug 2018

Investing in women - Your Money with Mary Holm

From Afternoons, 2:21 pm on 9 August 2018

Women tend to avoid varied and risky investments compared with men, and tend to have less money over time as a result, research shows. 

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This week on Your Money with Mary Holm, she discusses the findings from the Financial Markets Authority and others, which was explored at a recent gathering of a group called Women in Super. 

Mary says the FMA - which she is on the board of - is concerned that women are not involved enough in investing. 

She says research has found a wide variety of ways men are more involved in investing than women. 

“Men are more likely to read the annual statement, to have compared their scheme with other schemes, to have checked whether they’re on track to meet their retirement savings goals,” she says.  

“Men are also more inclined to be investing in shares, more inclined to be in a lot of different investments whereas women are in cash. 

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“Men were more knowledgeable and more confident about investing, they knew how to use investor materials more than the women did, they knew what the FMA is.” 

She says even simple things like that have an impact. 

“It doesn’t really matter if people don’t know what the FMA is, but it is good if people know there is some government body there doing work that enables us to be more confident.” 

She says that by the end of a person’s life that’s equivalent to tens of thousands of dollars, and while “men do trade more often than is good for them”, it’s also true that risk pays off. 

She says simply sticking to more conservative Kiwisaver fund schemes, for example, has a big impact. 

“In Kiwisaver, there are actually slightly more women than men, but they’re much more likely to be in the low-risk funds, much less likely to be in growth or aggressive funds, which is where the men are. 

“Largely as a result of that, some ANZ research found that women’s balances were 28 percent lower than men’s.” 

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“Sometimes women can quite often end up doing better but they don’t take enough risk.”

“Women want to be more certain about their money but the price of that is that they’re missing out on potential growth and they’re not getting as much protection from inflation. 

“If they’re investing in lower-risk funds then inflation is more likely to eat a fairly big hole in their returns.” 

Mary says it’s best not to try to time the market, but rather base your risk taking on whether or not you’re planning to spend your savings. 

“There might not be a crash, things might keep going pretty steadily for quite a long time or it might be two or three years off. 

“It’s just really not a good idea to try and do that. 

“If you were thinking of taking the money out for a house or if you’re in retirement and taking the money out you do want to be thinking about lower risk at that point.”

She says the Women in Super group discussed various possible reasons for women’s low appetite for investment risk. 

“Once you get a woman going they’re often quite good investors, in fact because they don’t tend to trade as often -  because they’ve got a longer time horizon, they’re more inclined to set goals."

It might have something to do with a lack of female financial advisors. 

“When we looked at some of the data on who is a financial advisor, they’re largely male and they’re largely older ... There’s nothing wrong with a younger woman going to an older man for financial advice but a lot of people would prefer to get advice from someone that’s a bit more like them. 

“The other point was the language that’s used around investing they talk about beating the market - which Gillian Boyd suggested means your involved in combat and competition, more of a blokey thing - they talk about level playing fields which is a sports allusion, they talk about building portfolios which is sort of about construction."

She says an image search for the word ‘investor’ also turns up something interesting. 

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The vast majority of images in a search for ‘investor’ are of white men.  Photo: fizkes/123RF

“They’re all white, I think, just about, and they’re nearly all male.” 

She says there is also some research from Australia which found women tend to show love and trust by deferring financial decisions to their male partner.

“And that’s a way that they can show that they love and trust the man. 

“People often end up divorced, or the man dies, but I want to add to that even if they don’t get divorced and even if they both stay alive for a long long time, the man doesn’t necessarily know what he’s talking about. 

“It’s far far better in a  relationship for both … to be savvy about finances and one of them can say to the other one ‘hey, maybe we should take more risk, maybe we should take less risk’.” 

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Making decisions together is usually the best way for a couple to approach finances - just like other major life decisions.  Photo: atic12/123RF