According to Fidelity data, 67% of women are now investing their savings in the stock market. This represents a significant 50% increase in the volume of female investors active in 2018. Further research suggests that women are not only arriving on the stock market in greater numbers, but they generally outperform their male counterparts too. Let’s take a deeper look into a seismic step towards financial inclusivity:
While Fidelity notes that the rise of female investors was a trend that was already emerging in 2018, the emergence of the Covid-19 pandemic accelerated female adoption of investing platforms. As lockdowns and social distancing measures loomed, more women acted quickly to prepare for the uncertainty – from building their emergency savings to updating their financial plans and evolving from their role as a saver to an investor.
Roundup investing platform, Nutmeg, has also found that the acceleration of women embracing investing tools had increased in the wake of the pandemic. According to annual figures, 40% of new Nutmeg investors in 2020 were women, whilst 44% believe that their shift towards investing will continue in the long term.
“It’s terrific to see women taking greater control of their finances and getting more invested to help achieve their financial goals,” said Kathleen Murphy, president of Personal Investing at Fidelity. “The last 18 months have been extremely challenging, and for many women, driven historic levels of stress surrounding their finances, job security and long-term savings. However, in working with millions of women across the country, they have clearly demonstrated their ability to persevere and focus on positive financial steps for the future.”
This growing trend of women embracing investing tools may present a significant opportunity to the industry. As more fintech platforms launch in a bid to make investing more accessible, female investors represent a fresh opportunity to earn new customers that are yet to establish loyalty to a single firm.
Women outperform men
Not only are women becoming more prevalent across the world of investing, but they’re also outperforming their male counterparts. On average, women investors achieve positive returns and surpass men by 40 basis points or 0.4%, according to analysis that spans 5.2 million accounts between 2011 and the end of 2020.
“It demonstrates that women are great investors, and when they take action, it can work out quite well for them,” noted Lorna Kapusta, head of women investors and customer engagement at Fidelity.
One of the trends that drives this level of outperformance comes from women making more risk-averse moves across their investment portfolios.
On average, women trade shares 49% less frequently than men, whilst funding their account 67% less frequently, avoiding fees associated with trading costs.
This buy and hold strategy is a tried and tested strategy that holds far less risk than the popular trading approaches that men appear to adopt more frequently, particularly as growth stocks like Amazon (AMZN), Apple (AAPL) and Microsoft (MSFT) have all shown that investing in a single asset can generate significant returns over time.
The path to investing inclusivity
So why has it taken so long for women to begin changing the tides across the investment landscape? It appears that the lack of gender equality spans across the world of finance.
When it comes to venture capital firms, just 4.5% of the partners are female, while only 10% of senior roles in private equity are held by women. However, we can already see evidence of tides changing and the broader financial landscape becoming largely more inclusive.
Whilst we can see more women, particularly those from the millennial and Gen Z generations, investing in both the stock market and cryptocurrency, there are still sizable gaps between women and men across the investment landscape, with men still far more likely to turn to building portfolios and buying stocks.
Whilst traditional finance may still suffer from the unconscious biases that cause institutions to market towards male investors, emerging fintechs have an opportunity to market themselves in a far more inclusive manner.
Maxim Manturov, head of investment research at Freedom Finance Europe, looks to leading fintech platforms to revolutionize the future of retail investing for all.
“Revolut, a $33 billion global financial technology player, will soon offer commission-free stock trading to U.S. customers for the first time,” he explains. “In addition, the start-up should soon announce that it has obtained a broker-dealer licence in the U.S., allowing it to compete with the likes of Robinhood and Square in the red-hot world of retail trading.”
This new generation of challenger banks and investing platforms have an excellent opportunity to tap into a female market that’s previously been left behind by traditional institutions. In an increasingly congested marketplace, winning the trust and custom of female investors is likely to be a money-spinning achievement for the platforms that champion inclusivity.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.