Women and Finance: do not be afraid of the stock market

Published on 29. October 2018
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Women and Finance: do not be afraid of the stock market

It's 2018, women are making headlines for fighting inequality, winning in the workplace and smashing more 'female-first' records than ever. Yet, they are still finding it harder to invest in stocks than men. The first part of our series "Show me the money! Women and Finance" deals with the topic of investments in the stock market, and what exactly is being done about it.

 

Sex sells. Up until the 20th century, women in the financial sector were associated only with their femininity and charm. Women were often portrayed as frivolous, lightly dressed and were not taken seriously. Men on the other hand, were portrayed as strong and courageous. While women in private households often managed the finances long before the industrial revolution and supported the business of their husbands or fathers. The UK was surprisingly one of the last European nations to allow women to open their own bank account - it was only until 1975 with the Sex and Discrimination act that women could legally store their own money in public institutions under their own name.

Luckily, times have changed. It’s now commonplace for women to earn and manage their own money. More recently, in May earlier this year, the New York Stock exchange appointed its first female leader in all its 226 year history. Progress, right? In terms of investment, there is a lot of catching up to do. While 62 % of Brits clearly see the leading role women play when it comes to budgeting, they are not entirely convinced about their knowledge regarding product investment such as equities, funds or life insurance. Only 34 % of the women state that they feel comfortable about their knowledge in these fields. Unlike 52% of the men who feel very comfortable with these topics, according to a Forsa survey commissioned by RaboDirect.

 

The mission: better financial education

While independent financial advisors specializing in helping women invest have been around for many years, women and finances have been picking up speed for a few years now. Women's investment seminars are regularly organized. In September 2018 the Women's Financial Summit "The Bridge – Women and Wealth Summit” was held for the first time in Berlin with around 200 participants. More and more books containing with financial tips for women are being published. One of them was written by Isabell Pohlmann together with experts from Stiftung Warentest. The guide "Financial Planner for Women" accompanies readers step by step on the path of financial independence and gives tips on how to develop the right investment strategy for each situation.

There are financial websites for women such as Madame, Moneypenny, Fortunalista or Financial Diva that give a fresh look at the supposedly shady financial investment topics. Behind the latter is Katja Eckhardt. The graduate economist wants to educate and motivate women to take their finances into their own hands. The 38-year-old is developing a podcast on sustainable investment strategies and advisory texts such as "Money for rainy days: Your Stock Exchange Warm-up". Her books, which feature crisp titles such as "Wealth is a women's thing" or "50 trades of Kat" are lively, understandable and sometimes provocative.

At the same time, the founder of the online magazine www.finanzdiva.de wants to disperse the prejudices of women (and men) concerning investment products: "In an environment without safe interest rates, one must invest in speculative products for a return on investment. However, this does not match the German value system and is also not supported by educational policy ", she criticizes. In her passion for investing and the goal to inspire young women in particular with regard to money, Katja Eckhardt is not deterred by the recent study. A survey found that one third of women the UK are not interested in finance. "Very few people are seriously interested in money and investments, but most people like to spend money," she said.

 

Women have a better risk awareness: use it!

Studies also suggest that women are more cautious about investing than men: nearly 61 % of women believe that investing in the stock market entails uncontrollable risks, according to a study called "The Investment Behavior of Germans" by Axa. The security aspect plays a special role for women in investing - so far, 72 % of women reject investments in equities, bonds or real estate, and 59 % of men, according to the Blackrock Investor Pulse study. According to financial diva founder Katja Eckhardt this is due to the financial situation of women: "Since women often work part-time jobs and earn on average less than their male colleagues for the same work - keyword Gender Pay Gap - they have less money Investing available and therefore rather choose investment products with moderate risks. "So women are not risk-averse, but risk-conscious.


Shares & stocks

The Stiftung Warentest Guide "Financial planner for women", focuses on the specific situation of women: "You have to begin with a financial checkup”. This means sitting down and writing down what saving goals you have, how much money you can invest and how risk-oriented you are. At the same time, the financial experts make it clear that those who want more return on investment than the meager safe interest rates cannot ignore stocks and shares. Lower risk with equity funds in order to minimize the risk; it’s advisable to invest in equity funds where many investors pay the money into a common pot. "Here, the risk of loss is lower than if you buy only shares of individual companies," said the guide.  

The benefits of ETFs

Those who have no time, nor desire to deal with the development on the stock exchanges are encouraged to use exchange-traded index funds. An "Exchange-Traded Fund" (ETF) typically tracks an index such as the DAX. Advantages of the ETFs: they are widely spread, cost-effective due to low running fees, tradable at any time on the stock exchange and are relatively flexible. Also, ETFs are suitable when it comes to saving plans. Keep a close eye on individual stocks! The financial diva, Eckhardt, stated recently: "Top quality values, especially in the field of luxury, entertainment and information technology are the most exciting ".

Eckhardt also advises to watch the current price level and to set a stop loss as a precautionary measure. The automatic order to sell shares, as soon as a stock is more or less clearly in the red, helps to limit losses. When investing in shares, the principle applies to them: "Only trade values ​​that you like, that you understand and whose business model you know."

If you want to exchange views with like-minded people before starting your first investment, you will find many suitable influencers by networking in our Fidor Smart Community.

 

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