Women and investing in 2024: Here’s everything you need to know

Women have altered the investing landscape in a big way over the past couple decades. While the stereotype of the typical investor targeted by the investment industry might be a man, women’s wealth is growing – and so is their investing footprint.

More women, especially younger generations, are investing. g. A 2023 study by Fidelity found that 60 percent of women invest in the stock market, up from just 44 percent in 2018.

These numbers are eye-opening considering the widening gender disparity brought on as a result of the pandemic. Women were disproportionately affected during the COVID-19 crisis, with women experiencing global employment losses at 5 percent versus 3.9 percent for men, according to a 2021 report by the International Labour Organization.

Despite these temporary setbacks, women’s wealth continues to grow.  Wealth manager Coutts says women’s income globally increased from $20 trillion in 2018 to $24 trillion in 2020. Looking at the decade ahead, the Boston Consulting Group expects women’s wealth to grow $5 trillion globally every year.

So, while women have been late to the game and were disproportionately affected by the pandemic, they hold incredible potential and are poised to transform the investment landscape for the future.

Women and investing by the numbers

Are women better investors?

Women might still invest less than men, but they’re making serious headway. Women today control more investable capital, voting shares of stock and corporate board seats than ever before, according to Morgan Stanley. In 2022, women held 32 percent of S&P 500 company board seats, according to consulting firm Spencer Stuart.

• Outperformance. A 2021 analysis by Fidelity of over 5 million customer accounts showed that women outperform men by an average of 40 basis points annually, or 0.4 percent, from 2011-2020.
• Overconfidence leads some men to trade in excess, while women hold back. A study by University of California-Berkeley found that men traded 45 percent more than women did. The study states that in areas such as finance, men are more overconfident than women.
• Planning for the future: Fidelity saw a 21 percent year-over-year increase among women opening Roth IRA accounts in the first eight months of 2023, according to its 2023 report.
• Staying the course: 51 percent of women who invest in the stock market said they wait it out and stay the course during times of market volatility, compared with 43 percent of men, according to Fidelity’s 2023 report.

Investing and the gender gap

Men invest at a larger scale than women, as evidenced by BNY Mellon’s findings that if women invested at the same rate as men there would be an extra $3.22 trillion of assets under management. Despite the tremendous gains women have made over the past decade in wealth and investing, the multi-trillion-dollar gap remains.

The investing gap compounds when taking race into consideration. A 2021 survey by CNBC and Momentive found that 59 percent of Black women do not own any investments, compared to 48 percent of Hispanic women and 34 percent of white women. To put it into perspective, only 23 percent of white men reported not being invested, compared to 42 percent of Black men and 38 percent of Hispanic men.

Ellevest, a robo-advising platform created primarily for women investors, claims there are three reasons the investment gap exists:

• The financial sector was created by men and for men.
• Women do not have as much extra money to invest as men.
• Society conditions women to believe they’re not good with money.

One place women seem to be closing the investment gap is retirement savings. At all income levels, women were more likely than men to join their employer’s retirement plan, according to Vanguard’s 2023 How America Saves report. To underline the point, 89 percent of women earning $50,000 to $74,999 a year participated in their employer’s plan — compared with 84 percent of men in the same income group.

Best ways for women to invest

A 2023 Fidelity study found that 48 percent of women don’t feel knowledgeable about how to invest their savings ahead of retirement. And 27 percent of women said they didn’t save for retirement because they feel they don’t make enough money.

But you don’t need a lot of money to start investing. You don’t have to be a Wall Street pro, either.

Here are a few ways to get started:

• Use a robo-advisor. If you’re looking for hands-off investing at a low price, you might consider a robo-advisor. These digital platforms can create a tailored portfolio based on your goals, investment time horizon and risk tolerance.
• Do it yourself. You can begin investing on your own by starting small with one or two mutual funds or ETFs. Contributing to a workplace 401(k) is an easy way to consistently invest money in the market.
• Consult an expert. No one knows about investing until they learn. You can start your search with Bankrate’s tips to help you choose the right advisor for you or even get matched with a financial advisor in your area.

Learn how to invest in women-owned businesses

Women-led businesses are on the rise. According to a survey by payroll solutions platform Gusto, in 2022 women founded almost half (47 percent) of new businesses in the U.S., an increase from 29 percent in 2019. Women entrepreneurship is increasing, but globally only one in three businesses are owned by women, says the World Bank.

• Gusto found that nearly half of the businesses started by women in 2020 (47 percent) were minority-owned.
• Gusto’s research also shows that minority women were more than twice as likely to start a new business due to being laid off or because they were worried about their financial situations.
• About a third of these women were even the sole income earners for their families.
• Men received capital investments at a 2.3 times higher rate than women in 2022, according to Gusto.

Women-led firms are on the rise, but there is still one sector that has a lot of catching-up to do: venture capital. Research published by the Harvard Business Review in 2023 found  that companies founded solely by women received less than 3 percent b of all venture capital investments. Researchers also found that women-led firms whose first round of VC funding came exclusively from female VC partners were less likely to raise a second round of funding than women-led firms whose first round of funding included male VC partners.

That said, women invest in women, even in the venture world. Venture capital firms that have women partners will invest in startups with a woman on the executive team nearly three times more than that of venture firms with only male partners, according to research from Kauffman Fellows. Venture firms with women partners are also four times as likely to invest in companies with women CEOs.

Investing in women-owned stocks and startups

You don’t have to be a venture capitalist to invest in women and their businesses.

Here are three ways to invest in female-led companies:

• Funds of women owned businesses: The SPDR MSCI USA Gender Diversity ETF (SHE) is a fund that picks companies based on the MSCI USA Gender Diversity Select Index, which seeks to provide exposure to U.S. companies that promote gender diversity throughout all levels of their organizations.
• Women-owned startups. Investing in women-led startups is an excellent option, given the success of women investors and business owners. In 2022, about 59 percent of small business-owning American women reported that their business was currently profitable, according to small business financing company Guidant. The U.S. Chamber of Commerce maintains a list of directories where you can learn how to support women-owned businesses.
• Crowdfunding: Nearly anyone can invest in startups via crowdfunding sites. “iFundWomen” is a site that allows you to contribute funds for female-led startups. You can browse the different companies and choose how much you want to contribute. You can even filter down further to businesses owned by Black and Latina women, among others.

Legendary female investors

FAQs

• What is the best investment for a woman?

  While there are many different investments to choose from, one of the best investments anyone can make is in a low-cost S&P 500 index fund. These funds provide instant diversification benefits at almost no cost and allow investors to participate in the growth of the largest U.S. companies. Over the long-term an investment in this type of fund has returned about 10 percent annually.

• Who is the most famous female investor?

  One of the most famous female investors today is the controversial Cathie Wood, founder and CEO of ARK Invest, an investment management firm best known for its disruptive ARK Innovation ETF. She’s a renowned stock picker and has made a name for herself by investing in companies that she believes are at the forefront of technological change.

• What is the best investment for beginners?

  Before diving into the investment world, beginners should determine their own risk tolerance, or their ability and willingness to take risk. Risk averse investors might be better off with fixed-income investments such as bonds or money-market funds, while investors with a higher risk tolerance can consider investing in the stock market. Index funds are a great way to get started with investing because of their low costs and diversification benefits.

• Why is investing important?

  Investing is important because it’s the best way to achieve long-term goals such as retirement or building wealth. Saving is important, but saving by itself likely won’t be enough to help you reach your financial goals. Investing will help you maintain your purchasing power over time and outpace the rate of inflation. The earlier you start investing, the more time your money will have to compound and grow.