That women ‘lack confidence to invest’ is a lazy answer to a major problem
Explaining away the gender investment gap as a matter of confidence has shifted responsibility away from the industry and onto women, writes Etoro UK MD Dan Moczulskiis
Britain says it wants to create a stronger investing culture, but a decade of policy changes has made investing harder to navigate. The capital gains tax annual exemption has fallen from £12,300 to £3,000, while upcoming ISA reforms will introduce different cash ISA allowances according to age, restrictions on transfers from investments back into cash and a charge on interest earned on cash held within a stocks and shares ISA. Investing long-term should be simple, yet the growing rulebook is anything but.
This complexity affects everyone, but it creates a particular barrier for people already less likely to see investing as something for them, including women. Just 26 per cent of women invest compared with 41 per cent of men, contributing to an investment gap now estimated by Boring Money at £574bn.
Research from Warwick Business School found that women investors outperformed men over the long term. Women were found to trade less frequently than men, make more considered decisions and were less likely to chase ‘lottery style’ investments, all behaviours that can support strong long-term returns. The issue, therefore, is not women’s ability to invest, it’s a problem of participation.
So why aren’t women investing?
The financial services industry has fallen back on one lazy explanation for the gender investment gap, that women ‘lack confidence’. This puts the responsibility on women to change while allowing the industry to avoid asking whether those of us creating the products, writing the risk warnings and explaining investing have made it unnecessarily difficult to take that first step.
There are many complex factors behind this, but the bigger challenge that is within our gift to change is that investing is portrayed as harder than it needs to be.
Our recent research with Appinio found that nearly three-quarters (73 per cent) of women who don’t invest believe they need to know a lot before they can begin, while seven in 10 (69 per cent) of women who already invest say investing is made to seem more complicated than it really is. This points to a clear perception gap where many non-investors believe that investing is too hard, they put it off altogether, while those who take the first step often discover it is more accessible than they expected.
Putting the theory to the test
At Etoro, we set out to change this and make investing more accessible. We created the Loud Investing Challenge challenging women to spend just 20 minutes a day for seven days learning the fundamentals in manageable steps. In the trial, Dr Ylva Baeckström of King’s College London tested 151 women’s attitudes towards investing before and after. The aim was to see what could happen when women were given a practical way to learn, supported by industry experts and other women taking part alongside them. After just seven days, those believing investing is “for people like me” more than doubled, from 34 per cent to 71 per cent and comfort with investment risk rose from 35 per cent to 61 per cent.
The course wasn’t designed to make women experts, but to provide them with enough knowledge to take an informed first step. By the end of the challenge, the proportion of those actively planning to start investing almost tripled, from 13 per cent to 38 per cent. The markets had not changed nor had the risks, but what changed was participant’s understanding of them. The findings demonstrate how practical learning can meaningfully improve comfort with risk and appetite for investment.
If Britain genuinely wants more people to invest, it must stop making investing feel like an activity reserved for a select few. Investing does not have to mean understanding AI or picking the next cryptocurrency. It can be as simple as putting a small amount each month into a diversified tracker and leaving it there for the long term. The industry needs to do a better job of showing people that.
Dan Moczulskiis is UK managing director of Etoro