Thinking ahead – the psychology of investing for women

It’s not a subject that makes for everyday conversation, but savings, investments and superannuation have a fundamental bearing on our quality of life for ourselves and our families for the future.

Despite the introduction of KiwiSaver and an increase in education, there are still hurdles for many people to achieve their retirement goals or even create opportunities for future generations.

Women face extra challenges

Unfortunately, these hurdles can be compounded for women, not only in terms of the wage gap but also in career progression. While men are increasingly involved in raising children, it is still the majority of women that take time out of the workforce to raise a family. When women return to the workforce, they may not do so in a full-time capacity, and there may be a period of retraining to get back to where they were before. This leaves a big chunk out of KiwiSaver contributions, ongoing investing and saving for the future.

Yvonne Davie, General Manager and former leader of the Superannuation and Savings team of investment advisers at Craigs Investment Partners suggests more needs to be done across the board to address this hurdle, but there’s a lot women can do individually with the right advice.

“We need to better understand some of the unique challenges for women when it comes to the savings gap and advocate for real change that will make a difference. But I think women can also make the most of the time that they are in the workforce by getting the right advice to ensure their investment funds are invested appropriately.”

It’s not just the wage gap and career path that can hold female investors back, with women often less confident about their ability to manage long term finances. Lately, though, this has started to even out. U.S. Bank’s 2022 Women and Wealth Insights study has found that 55% of women and 60% of men are confident in their ability to manage their finances compared with 48% and 61%, respectively, in the bank’s report from two years ago.

Women make great investors

And while women still have a way to go in terms of financial self-confidence compared to their male counterparts, some studies suggest they make better investors.

Fidelity Investments conducted a study in 2021 that analysed the behaviour of 5.2 million retail investors and found that women outperformed the men by about 0.4% per year which, when extrapolated out with those compounding returns year after year, creates a marked difference in the performance of their investments.

Davie has observed a similar situation here. “There are misconceptions that women are not good at investing, but by all accounts, we are actually pretty good at it. And I think some of that is down to being more open to seeking advice and setting a really good strategy with our investments and sticking with it. We don’t tend to chop and change or chase investments. There is plenty of evidence that shows it is time in the market, not timing the market that really counts when you’ve got a longer-term investment strategy.”

Davie warns that while women tend to be a little bit more risk averse which is good for the short term, it’s also important to ensure your investment portfolio is in growth assets for the longer term.

Of course, there is a lot more to it than deciding between a conservative or growth approach.

The value of an investment adviser

“As investment advisers, we need to understand the markets, the fundamentals and have a view on what’s happening in the economic cycle. But a major part of what an investment adviser does is working closely with clients to understand their needs. What are they trying to achieve? What are their longer-term goals or even their short-term goals around their life stage?” says Davie.

The support of an expert investment adviser can also be important psychologically, not only during tough times in the market but also to help keep focused on the right strategy. The investment adviser’s job is to match the client’s risk appetite with the appropriate investment portfolio.

“During the highs and lows, it’s about getting that balance right. If somebody’s not going to sleep at night because their portfolio has dropped by 5% or 10%, then we need to adjust their portfolio accordingly.”

So, as well as the financial benefits that come from having the right strategy, there is also the peace of mind that comes from working with an expert investment adviser. And while there are challenges for women, Davie encourages them to reach out and get some advice.

Start the conversation

“It’s about starting a conversation. I also think that having a conversation in the household about money is really important. Many women will be managing the household budget, and whilst that’s great, what are we doing about our investments? Where’s our emergency fund, should things go wrong? What are our longer-term goals? It’s about having open conversations at home and with your partner, with your family, with your kids. You don’t need a huge lump sum to start, you don’t need to be a multi-millionaire to be an investor. If you’re in KiwiSaver, you are an investor by virtue of being in there.”

Creating accessibility to advice is fundamental to changing the statistics. It’s why Craigs Investment Partners has been running a Women’s Wealth programme since 2007, focusing on empowering women of all ages with more confidence and knowledge to start investing or become better investors.

“A big part of that is trying to address and educate women around what they can be doing to improve these outcomes. It is a big focus of our organisation, and our investment advisers are passionate about providing accessible support.”

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