Why are Investments important?
Saving money is great! Investing, however, is powerful. When you put your money in an investment account versus a savings account, there is, of course, inherent risk. But, along with this risk comes the potential for greater earnings. It helps in securing your financial future.
It is no secret that sometimes women have to do more with less, and unfortunately, the area where this seemingly affects them the most is the finances
What is gender gap investment?
The gender investing gap is the discrepancy between the amount of money the average woman gets back on her investments in her lifetime, versus the return the average man gets back on his investments over the course of his lifetime.
Do women invest differently than men?
Standard finance theory suggests that—all else equal—women’s participation rates in the capital market and the composition of their portfolios should be no different from those of men. That is, investors—male or female— should take on as much risk as is commensurate with their risk attitude. At first view and perhaps contrary to this prediction, however, in reality women participate in the capital market less often than men and when they do, their risky asset portfolios look different from those of their male counterparts.
What Happens When Women Invest?
The grand irony of it all, however, is that when women do invest, they outperform or are considered “smarter” investors than men by industry experts. In a survey conducted between 2012 and 2016 by the Warwick School of Business on a group of 2,456 investors, researchers found that, of the group, the female investors did better than their male counterparts by 1.2 percent each year. Shocking, right? The truth is, while women may be more conservative with their money throughout their careers, that risk awareness and pragmatism actually plays in a woman’s favor in terms of choosing the stocks and playing cool when markets are volatile.
Factors that contribute to the Gender Investment Gap
Despite progress being made in women’s financial empowerment ,the investment gap remains a perpetual issue ,while its imperative to tackle this issue, first of all we must get to the grass root level and analyze what factors actually cause this gap.
One of the prominent reasons for the gender investment gap is the gender pay gap, women tend to earn less than men ,which further implies that they have less disposable income to invest.
Women tend to have this misconception that they need excess cash or a large capital amount to begin investing.
Studies have further presented that even if women have the same amount of disposable income as men ,they may be less likely to invest it ,partly due to lack of financial education and confidence in their ability to make investment decisions.
According to statistical data, women have always been in favor of cautious investment strategies and therefore are hesitant to take a chance on the market whenever risk is involved. So women engage less with investment providers than men and in general, have an aversion to risk taking.
IMPACTS
1. Limited access to capital: Women-owned businesses face challenges in raising capital due to the gender investment gap. This limits their ability to grow and scale their businesses.
2. Reduced earnings potential: Women's earning potential may be constrained by the gender investment gap since they might lack the resources to launch or expand their own firms. According to a study by the Securities and Exchange Board of India (SEBI), women make up only 33% of the country's mutual fund investors, despite accounting for more than half of the population.
3. Underrepresentation in leadership roles: Women hold only 25% of senior management positions in the banking sector in India, and only 2% of managing director positions. Women are less likely to be in leadership roles due to limited access to capital. This can limit their influence and impact in the workplace.
4. Limited innovation: The gender investment gap can limit innovation, as women may not have the necessary resources to develop and bring new ideas to market.
5. Economic inequality: The gender investment gap contributes to economic inequality, as women are more likely to be in low-paying jobs and have limited opportunities for advancement.
SOLUTIONS TO CLEAR THE GENDER INVESTMENT GAP:
Building up an inclusive financial community- In order to motivate more and more women investors, the creation of an inclusive financial community is very important. This can be done by increasing the number of women fund managers and advisors in the investment industry.
Less use of Financial Jargons- Use of financial jargons implies that the use of complex financial language can create ambiguity among women thereby making them unable to understand the technical language. This dissuades the potential women investors from investing more than they really do.
Equitable distribution of income- The primary reason behind less investment done by women is that men make up a higher income bracket than women and thus, even if the proportion of income invested by men and women is quite similar the aggregate turns out to be lesser in case of women than men. It has been statistically proven that men and women invest a somewhat similar proportion of their income and thus by reducing income inequality among men and women, the gender investment gap can also be reduced to a great extent.
Increase in Impact Investment- It has been observed that women prefer impact investment, that is, the investments which are made with the intention to generate a positive social and economic return along with financial return. Thus, women's investment would increase if impact investment is motivated such that the impact of the investment is aligned with their personal values.
Education- It is very important to educate men such that the gender stereotypes are changed and a mindset is created among men that women are equal to them such that the inclusion of women in the investment industry can be improved such that the gender investment gap can be eliminated.
Conclusion
According to recent statistics, women are taking charge of their finances and investing more than ever before. In the past, women were not encouraged to take financial risks, but that time has changed. Now, women are making informed decisions and seeking new opportunities to increase their wealth. The proportion of women investing in equities in India had reportedly jumped from 16% to 24% in two years. Women's investment in India is on the rise. Many women have realized that they need to start investing in order to secure their future.
Additionally, women are now diversifying their investments. They are taking calculated risks and venturing into new territories that were once considered male-dominated. The median age of women investors is now 33 (vs 34 in 2022), an indication of younger women taking control of their finances.
While there is still progress to be made, the future looks bright for female investors in India.
Authors: Priyansh Kotiya , Dhun Chaturvedi , Durva Jangra , Riya Malhotra
Illustrator: Chetaniya Tamta
Comments