Wendy, a 35-year-old Chinese engineer for a Singapore technology company earns a good income, but she is concerned she will not have enough to cover her retirement. Her only retirement planning is her company’s retirement savings plan. If she lives to 100, however, as many women in her region of China do, she would have to lower the quality of her life to stretch out her income. In search of retirement solutions, she visited her boyfriend’s financial planner, anxious to hear how he could increase her investment returns.
The planner took out a portfolio with ‘W’ on the front. He recommended a mutual fund invested in consumer retail stocks. He then praised the three-year 40%-plus return on Estee Lauder stock. “I got it,” says Wendy. “This was the Women’s portfolio.” Her boyfriend had just made $10,000 on a tech IPO, and she was getting the Mary Kay portfolio.
Welcome to the world of gender investment marketing. Investment companies have stepped up efforts to market to the people responsible for 25% of global spending, but they still have a lot to learn. A Baby Boomer would have taken the pink portfolio, but women of Gen X and Gen Y are more gender neutral.
Female Investing Habits Deconstructed
Women seek more than investment returns. A key motivator for women investors is purpose, according to wealth advisor Pershing. More pragmatic than men, women align investments with future financial and health needs. They are also motivated to improve the well being of others. Growing up alongside the rise in socially responsible investing, younger female investors are more interested in investments that make a social impact.
- Female Gender Investment Trends
Purpose-driven Goals – Women are motivated to make investments that meet major security concerns, for themselves and others – in order, retirement, education, flexibility and community.
Impact Investing – Women invest more in environment and socially responsible investments than men, reflecting a values-driven investment philosophy.
Familiarity – Older women, however, are more likely to invest in companies and products they know.
Pink Portfolio – Women in general make investment decisions quicker on investments they know. Thus, they would be more likely to invest in stocks representing brands they use every day.
- Investing Behaviour
Low Risk Tolerance – It is well known that women have a lower risk tolerance than men. Since the 2008 financial crisis, the number of women who deem themselves to be “very conservative” and “somewhat conservative” investors has doubled, from 24% in 2009 to 48% in 2014.
Less Likely to Increase a Winning Position – Women are also more likely to cash in gains but hold onto stocks that are losing value than men. Women’s losing stocks, though, are more likely to be conservative value stocks with strong underlying fundamentals that will perform well over time.
More Risk
Aligning investment goals with purpose is one way in which women are showing a willingness to increase their risk exposure. They may, for example, put 5% into a high growth alternative energy fund but otherwise eschew growth stocks. Younger generations of investors are less interested in companies targeting products to women or households. These younger women are closing the pay gap by bringing home 93% of what men earn, reports Pershing, and are more likely to be involved in the technology or science fields.
Women today are more interested in investing in women than pink products. One third of American businesses are owned by women, and women make up 25% of senior management positions. Wendy would likely prefer to invest a fund like the Pax Global Women’s Leadership Index Fund, which invests in companies with a high level of female leadership. Created by one of the most successful female wealth advisors, Sallie Krawcheck, the fund’s strength is its diversity. Krawcheck says companies with diverse management teams perform better. Not coincidentally, they have the same traits as successful female investors – a long-term focus and lower risk.
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