Recent studies show the majority of investors are male, even though women are expected in the next few years to control the majority of the UK’s wealth.
Our recent survey of female clients, results of which are outlined in our recent report, revealed over half of respondents considered themselves the primary decision maker of their household, with a further third sharing financial responsibilities with their partner.
Despite this, further data suggested most women were uncomfortable making ‘big decisions’ with regards to finance, instead deferring these to their partner. Reluctance can also be seen by the demographic makeup of women who are investing. Citing figures from the Office for National Statistics, our report found women over 60 are more likely to invest as they near retirement and begin to assess their post-employment financial future. However, women should not wait this long to start taking an interest in investing as it can cost them in the long term by reducing the potential benefits.
Multiple studies show that starting to invest early increases the chances of reaping the rewards in later life, allowing the power of compound interest to be harnessed on a larger scale. Market access for investors with relatively small capital has improved due to a growing number of products and instruments. This means that one need not wait until receiving a lump-sum payment before beginning their investment journey. Starting early is particularly important as women typically have a longer life expectancy than men.
Despite a long-term trend of making financial services more accessible, jargon remains, and the world of personal finance, and specifically investing, can feel overwhelming. At Quilter Cheviot, we are working hard as a business to make investing more accessible and to create a more supportive environment to new investors.
With this in mind, we believe there are five key points for female investors to consider when investing:
1. Do your own research
The best place from which to begin one’s investment journey is by researching the subject matter. There are myriad asset classes out there, but typically portfolios consist of a blend of fixed income, equities, and cash (or cash equivalents). Within each bucket, there are geographical and sector-specific vehicles to consider, allowing you to determine where you would like your money allocated. The variety of investment options available allows investors to tailor their portfolio towards their own personal preferences and risk tolerance.
2. Set financial goals
Having familiarised yourself with the broader investment universe, it is worth considering what your financial goals may be. This could factor in both the longer term (i.e. retirement) as well as shorter-term ambitions (i.e. home improvements). Working alongside your investment manager, you will be able to tailor a portfolio specifically designed to meet these requirements.
3. Work with a professional
For the cautious investor, there is likely to be little appetite for entering your investment journey unarmed, or ill at ease with the options available. But even with substantial research undertaken, it is worth complementing this with the use of a professional adviser. The investment universe is vast, and monitoring markets is a full-time occupation, so finding an adviser who is sensitive to your sense of risk, ambition and personal circumstances will add significant value, ensuring that there are no opportunities missed and that your money is working to its fullest potential.
4. Understand risk
There is, unfortunately, no asset class devoid of risk. Even holding one’s wealth entirely in cash has difficulties attached, particularly during periods of inflation, which can eat into the value of cash in real terms (i.e. prices moving higher). At the other end of the spectrum, higher risk investments can often provide larger returns, but are likely to be more volatile and sensitive to market movements.
While portfolios can go up as well as down, long-term trends have shown most markets to have gone up. So, there is more opportunity in longer term investments, but we acknowledge that not everyone is comfortable with this or has capacity for short-term loss.
Each investor needs to find a risk tolerance that is right for them and their own set of personal circumstances.
5. Diversify your portfolio
While there is no one ‘safe haven’ asset class or investment opportunity, it stands to reason that by diversifying one’s portfolio, the risk may be mitigated as asset classes rarely fall (or rise) at the same time.
A diverse portfolio is one that combines a variety of investments that have different properties. We categorise these in what are known as asset classes. Equities, for example, are typically considered to be riskier than fixed income. By populating your portfolio with several asset classes, that move and respond differently to broader market movements, you are more likely to mitigate any sharp declines in the market.
While this approach may deliver returns lower than by investing 100% of your assets in a fastrising stock, it will soften any dip in the individual performance of a given fund or company and allow you to spread your holdings over a selection of different investment themes and markets.