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THE ALLURE OF WOMEN & INVESTING

by | Aug 1, 2021

National Women’s Day encourages us to reflect on all that we have achieved over the past century, and we have a lot to be proud of. In 2021, there are significantly more female leaders at the helm of Fortune 500 companies as well as at the highest levels of government around the world.  But this is a journey, and we have a long way to go.

Growing research suggests that the presence of women on corporate boards and in executive positions is linked to superior financial performance.  For this reason, true diversity displayed by women – which incorporates an expression of different cultures, thoughts, energy and ideas – is increasingly in the spotlight in the financial world, and asset management companies themselves are pushing for diversity at the companies in which they invest.

Why then are women still feeling the financial costs and how does this impact on their ability to invest?

It is a known fact that women typically earn less through their working life than their male counterparts and are more likely to take career breaks to raise a family or care for relatives. In addition, women live longer than men, and their medical expenses in these later years increase substantially.  Women are also at the mercy of pink tax – a form of gender-based price discrimination – where retailers charge women a premium on products that cannot be differentiated except from a gender perspective. For example, at a major grocery chain, women are being charged R25 more for a household name disposable razor, just because it came in pink.  At a popular clothing retailer, women are being charged R20 more for an identical t-shirt despite the fact that the men’s t-shirt uses more fabric. Similarly, exactly the same multi-vitamins ‘for him’ are priced at R89 and at R105 ‘for her’.

This Covid pandemic has set women back further financially as more and more opt out of the workforce and struggle with the overwhelming demands of children and elderly parents – causing what many have dubbed a “she-cession”. The long-term effects will not be fully calculated for many decades.

In South Africa specifically, 41% of women with children consider themselves single moms, and 60% of them receive no financial contribution at all from the fathers of their children. This is up from 47% in 2019.  Whilst maintenance orders are legally enforceable court orders, if a father loses his job or has his income cut, he can approach the court to reduce maintenance payments owing to loss of income beyond his control. As this reduction is likely to be granted, single moms are likely to be in an even more precarious position.

Single mothers already show remarkable resilience in so many aspects of their lives that it’s understandable that some areas face neglect. Financial planning tends to fall by the wayside as women concentrate on juggling their finances to support their families, with little thought for themselves.

The dire need for women to invest

As we have established, women have less income to invest thanks to the gender wage gap, and less time to earn an income – and consequently less time in the market – due to taking career breaks for family responsibilities, leading to a marked reduction in their ability to save for their retirement years.  This is sadly ironic, as research has shown that when women do invest, they make better investors than their male counterparts.  This is largely attributed to a lack of confidence and courage in their own abilities, leading to a more cautious approach, and being more open to following professional investment advice.

To elaborate a little on this, whilst a lack of confidence and courage isn’t exactly something we aspire towards, it has its merits when it comes to investing.  Over-confidence is often linked with ego and can destroy value as quickly as it is earned.  Lack of confidence, conversely, leads to women trading less and following a buy-and-hold strategy, which allows for time in the market and the benefits of compounding of returns and avoids the erosion of such returns caused by excessive trading. Furthermore, by asking a professional for help, women remove emotions from investing, and are able to follow through on a suitable retirement plan specific to their needs.

Women in the world

Life is not easy, but if we’re brave enough to open our eyes, there is so much magnificence to see.  This is not an article about women being less than or being without.  It’s more an article about women acknowledging their value in society, and for others to appreciate their selfless contribution.  It’s wonderful to see women rising in ranks around the world, being seen for their authenticity.  But it’s also crucial for women to be selfish in their selflessness, as without taking control of their investments, they are placing themselves at the mercy of others.  Blind spots can be brutal for a financially fit life, and these vulnerabilities are aspects that we can intentionally strengthen with practice, time, or desire.  Let’s choose wisely.  Women have come a long way from the days of being the “housewife” and the “homemaker”, but our journey is far from over.

Sources:  Daily Maverick, Morningstar & MoneyWeb