Earlier this year, I wrote a column for the FT called “Where are all the female investors?” in response to an almanac of musings from “the world’s best investors”, only one of whom turned out to be a woman.
I named many candidates in the article that I thought worthy of inclusion, although few women have obtained “household name” investor status. The root cause: a chronic under-representation of women investing money — both within the industry, and at home.
So step up Oprah Winfrey. Her decision to buy shares in Weight Watchers has shown Wall Street’s most celebrated male investors how it’s done. Since her initial investment in October 2015 the shares have risen 1,400 per cent, shooting up from $7 to a record $101 per share.
Peter Lynch — one of many male household names in investment — popularised the notion of the “Bagger” to describe deals producing returns of many multiples of an investor’s initial capital. These could be two, three, five times the money first deployed, in the rarest cases, sometimes 10-baggers or even better.
Back to Oprah. With $43m worth of skin in the game, she agreed to lend her powerful personal brand to Weight Watchers by joining its board. This is typically the action of so-called “activist investors”: to build up a sizeable position in a business, agitate for a position and then shake things up from within. Although something tells me Oprah might prefer the term “self-help”.
Regardless, tapping into the psychology of this deal goes some way to understanding the more fundamental issue of why women still shy away from investing.
Fidelity International has been doing a lot of work on this, culminating in a report entitled The Financial Power of Women, published this week.
The first (and rather obvious) problem that most women face is the gender pay gap. If you earn less, or take a career break to raise a family, your pension contributions will be lower — making a woman’s future retirement pot worth an average 11 per cent less than a man’s, according to our calculations (see the report for how we worked this out).
However, we found women could close this “gender pensions gap” if they dedicated an additional 1 per cent of their salary towards their pension early in their careers. Over more than 39 years, this is an average of just £35 per month.
Understanding women’s attitudes to risk is also key. Our research found that they were less likely to consider their savings as money for their sole use, but for their family’s. Think about money in this way, and it’s likely you will be far less willing to take any risks.
The annual HMRC statistics on Isa sales support this view. While women hold far more Isa accounts overall, we tend to prefer cash Isas. Men are more likely than women to hold stocks and shares Isas. Yet female caution comes at a hefty cost.
Our analysis shows that if women had invested their full Isa allowance each tax year for the past four years into a FTSE All Share tracker, it would have generated a total return of more than 25 per cent excluding charges, growing an investment totalling £65,480 into one worth £82,434.
An investment tracking the US stock market or a global index would have yielded even stronger returns.
By contrast, those who left the money in the average cash savings account would have grown their pot by just £290, or a paltry 0.44 per cent.
Leaving long-term savings in cash means women risk failing to unlock their financial potential. Yet our research also highlighted a deeper lack of engagement. More than half of women did not know where their pension was invested, whilst over one-third did not know how much their pension pot was worth.
Oprah was wealthy enough to take a big risk on a single stock. She apparently did so after trying the new Weight Watchers food plan herself. My point? She invested in what she knew.
In my experience, a lot of women shy away from investment because they feel they lack specialist knowledge. As the Sage of Omaha himself put it: “Only invest in businesses you understand.” Your job, your reading habits and even your behaviour as a consumer might mean you know a lot more than you think. But there is no need to spend time researching individual companies and picking stocks if you don’t want to — the technology exists to build a diversified portfolio using funds and ETFs.
Like Warren Buffett, Mr Lynch was an extremely patient investor, stating that the best returns from his investments tended to come not in the third or fourth week or month after they were purchased, but in the third or fourth year.
Men often fall prey to impatience, as Terrance Odean, a professor at Berkeley’s Haas School of Business, found back in the 1990s. His research found that men traded their investments 45 per cent more than women, blaming this on male overconfidence. Women in contrast, tended to be buy and hold investors — and those who are in it for the long term benefit from the upward trend of markets, and will also save investment fees over time.
Finally, allow me to reference a female investor who is not a household name, but in my eyes, an investment rock star. My mum.
Divorced and about to put her two daughters through university on a South African teacher’s salary, she took the plunge and invested. One stock she bought was Capitec, a bank that began trading in February 2002, rising from less than ZAR2 per share to reach about ZAR868 today. That’s a bagger. Her example sparked my own interest in investment.
To unlock the financial power of women, we need to address the personal, professional and policy barriers that stop women from investing. If we are to increase the numbers of female investors, not to mention female investment professionals, we should remember: if you can see it, you can be it.
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