Gender perspectives: how men and women approach investing differently

Investing is a popular means of potentially accumulating wealth for many people. While men and women may share common financial goals, it is no secret that their approaches to investing often tend to differ.

In 2023, around 22 million (42 percent) UK adults are invested in the stock market. This represents a 5 percent increase from 2021, but there is still a significant gender gap when it comes to investing. Only about one-third (32 percent) of women have invested, compared to slightly over half (52 percent) of men.

The FCA’s Financial Lives survey which was completed in February 2020 by 16,190 respondents found that when it comes to investments, a higher proportion of men hold investment products. The largest differences are stocks and shares ISAs (19% of men compared with 12% of women) and shares and equities (26% of men compared to 17% of women).

It seems that women tend to have a preference for keeping cash in a savings account, rather than investing it. Unfortunately, while the numerical value of £10,000 cash held in a bank account may remain static over time, the amount you can buy with that cash does not. This is because prices of the goods and services we pay for have a habit of going up over time, an effect we all know as inflation.

For example, £1 would have bought you 20 pints of milk (at 5p each) in 1975, but can only buy you one pint (at 69p) today. This shows how inflation can lead the real value of cash to dwindle over time.

And this isn’t the only gender-based disparity when it comes to investment strategies. According to the FCA’s Financial Lives survey, here are five contrasting investment approaches between men and women and their potential implications.

1. Risk tolerance

One crucial aspect where men and women differ in their investment styles is risk tolerance, so their appetite or willingness to take risk. The study found that men generally exhibit a higher tolerance for risk compared to women with a slightly higher proportion of women owning a cash ISA (37% vs 35%) rather than more risky investments, potentially reflecting a lower risk appetite. This disparity can be attributed to various factors, including societal norms, confidence levels, and differing perceptions of financial security.

Men often embrace riskier investment opportunities, such as stocks, while women may favour perceived safer options like bonds or property, seeking stability and preservation of capital.

2. Investment knowledge and confidence

Another differentiating factor lies in the level of investment knowledge and confidence. The research indicates that men tend to display more confidence in their investment decisions, even when they possess similar levels of financial literacy as women. This confidence disparity may stem from societal expectations, historical gender roles, or the fact that women perceive investing as a predominately male activity.

Women, on the other hand, may prefer to enhance their knowledge before delving into investment ventures, seeking a thorough understanding of the market dynamics.

3. Investment objectives

Men and women often have distinct investment objectives. While both genders strive for financial growth, their priorities and time horizons can differ. Women may be more inclined toward long-term investing with a focus on future finances, retirement planning, and wealth preservation.

In contrast, men may lean towards short-term gains, capital appreciation, and higher-risk investment strategies that all aim for potentially higher returns, although this is not guaranteed.

4. Investment preferences

Investment preferences also often vary between genders. Women tend to exhibit greater interest in sustainable investing and impact-driven strategies which aims to make a measurable positive social or environmental impact as well as potentially generating a financial return. They may prioritise investments aligned with their values, such as environmental, social, and governance (ESG) criteria.

In Boring Money’s Sustainable Investing Report 2021, it was stated that 45% of women who held savings or investment products said that they wanted their investment manager to focus on sustainable investments, compared to 34% of men.

Men, on the other hand, may have a broader range of investment preferences, including sectors that traditionally yield higher potential returns or speculative investments that align with their risk tolerance.

5. Financial planning and decision-making

When it comes to financial planning and decision-making, men and women may approach these processes differently. Women often tend to be more detail-oriented, emphasising comprehensive planning, diversification, and risk management.

Men, on the other hand, may exhibit a more competitive nature, seeking individual financial successes and taking a more active role in investment decision-making.

Implications and the way forward

The factors that have been highlighted may contribute to women choosing to delay investing until later in life. This means that they are potentially losing out on exploiting the power of compound interest. This decision alone could make achieving financial resilience a much more difficult task for women.

On a positive note, women’s tendency to be more risk averse and considered when investing, may result in them being successful over the long-term. Although as with all investments, the value of investments and the income from them can fall as well as rise and are not guaranteed. Investors might not get back their initial investment.

Encouraging financial education, fostering gender diversity within the investment industry, and debunking gender biases could help bridge the existing gaps between the investment approaches of men and women. Empowering women with confidence, knowledge, and access to diverse investment opportunities could lead to greater gender equality in investment practices.