How Socioeconomic Factors Impact Women’s Investment Success

Contrary to common misconceptions, women can be equally successful investors as men. The biggest difference lies not in risk aversion but in socioeconomic factors such as high childcare costs, gendered labor divisions, and the gender pay gap. These factors contribute to economic disparities between male and female investors.

Currently, only 28% of women are investors compared to 45% of men, according to a survey by Opinium for Hargreaves Lansdown (HL). The main barrier for women is a lack of funds, not confidence or knowledge.

In their thirties, women often face significant financial challenges like house purchases, bills, low wages, and childcare. Taking time out of work for childcare leads to reduced income and lower contributions to financial goals, including pensions. Women returning to work part-time also experience salary impacts.

The gender pay gap stands at 14.3%, with the gender pension gap at 40.5%. Women aged 35-54 show the largest investment disparity, with only 19% investing compared to 36% of men.

HL’s Financially Fearless ‘Why Women Invest’ report revealed that family attitudes toward money significantly influence whether women become investors. Fathers are more likely to discuss finances with sons, leading to higher investment rates among men.

However, change is occurring. Women are creating wealth faster than ever, with estimates suggesting 70% of global wealth will be in women’s hands within the next two generations. In 2019, 23.3% of households had a female breadwinner, up from 19.8% in 2004. Additionally, 89% of women now have their own money.

How Should Women Invest?

1. Invest if You Can: The key is not timing the market but spending time in the market.
2. Prioritize Your Pension: If you earn more than £6,240, ask to be enrolled in your workplace pension scheme for employer top-ups.
3. National Insurance: Ensure you’re receiving all eligible National Insurance credits and consider topping up from your partner’s salary.
4. Self-Invested Personal Pension (SIPP): Set up a SIPP with household income and contribute regularly or as a lump sum.
5. Efficient Investing: Investing doesn’t require much time; many women spend less than 30 minutes a month managing their investments.

Women’s investment priorities align with men’s, focusing on returns, fees, holdings, geography, and fund management. Understanding the purpose of investments, when the money will be needed, and existing portfolio biases is crucial for success.