Why female investors are on the rise

Marietjie Geldenhuys, Client Portfolio Analyst at Stonehage Fleming

Research shows that certain gender-based qualities give women a natural advantage in long-term investing. Stonehage Fleming Investment Management in South Africa reported a 35% rise in female investor clients over the last four years.

Client Portfolio Analyst, Marietjie Geldenhuys, agrees that women naturally possess investor characteristics that support prudent investment decisions and behaviour, which leads to long-term investment success.

Taking risks

Where men tend to focus on investment performance, women naturally invest with a more holistic approach, says Geldenhuys. “Typically, women do not assess risk in terms of specific risk and return metrics, but rather focus on a broader understanding of ‘a worst-case scenario’ and the associated impact.” She adds that if women are truly risk-averse or occasionally too conservative, this may actually lead them to gather further information and research on the investments they are pursuing, which ultimately leads to greater success with their investments.

A study compiled by Barbara Stewart, a Chartered Financial Analyst, researcher and author on the issue of women and finance, supports this view. A key finding from Stewart’s research, where 800 highly accomplished women from diverse age groups, professions, industries and backgrounds across the world were interviewed, revealed that as long as a woman is interested in an opportunity and it aligns with her personal goals and concerns, she will be encouraged to take a measured approach to risk and investing. Women may take more time to make an investment decision, but once a decision is made, the investment is usually made with conviction, often with a buy and hold strategy established for the longer term. Research conducted by UK firm, Hargreaves Lansdown, revealed that female investors return on average 0.81% more than men over a three-year period.

Confidence and trading

A reasonable level of financial and self-confidence is a critical pre-condition for any successful investor. However, overconfidence in one’s own abilities can often lead to more changes to investment portfolios, taking disproportionate risk and frequent trading, which can result in lower returns. Trading too frequently can result in multiple transaction fees, which while individually small, compounds over time and eats into portfolio returns in the long term. Numerous studies show that men are more likely to display overconfidence, particularly in the area of finance, which explains why they trade more frequently than women and commonly produce lower returns over a long-term investment horizon.

“Women are in general committed to their investments for the long term and tend to stay invested throughout various market cycles,” says Geldenhuys. “A fundamental principle of investing is not to try and time markets perfectly, especially during recessionary and volatile market environments. As the famous mutual fund manager, Peter Lynch said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost during corrections themselves”. Investors who continually tweak portfolios generally don’t do as well as someone who adopts a “buy to hold” investment strategy.

More than performance

When it comes to investing, women today want more than just good financial returns. They also want their money to be invested in a way that matches their values and ideals, according to results from a survey conducted by Moxie Future, an online education, insight and community platform that empowers female investors. Women have greater intent and focus on the realisation of a financial goal over the thrill and excitement of investing.

Although women have been under-represented in the investment world, this is slowly changing. They are increasingly playing a vital role in driving income and wealth for their families and are becoming key decisions makers for their families’ wealth.

Interesting to note, 51% of Stonehage Fleming staff in South Africa are women, and the number of women on the investment management team in South Africa has doubled in the last five years (figures as at August 2020).