Globally, equity investors are predominantly male, with males outnumbering females in every country. The global ratio is 76 percent male to 24 percent female. The study conducted by ChoiceBroker found that among emerging markets, the Philippines has the highest number of female investors with a female investor ratio of 44 percent; In India this ratio is 21 percent. It is poor in Brazil (16), Pakistan (15) and Bangladesh (12).
Some interesting features in the financial behavior of women are:
Women are good savers and saving is goal-oriented
Women are generally good at saving money. It has been so historically. Especially in developing economies, women are frugal in spending and save whatever they can.
More importantly, they save for the attainment of certain goals like education of children, marriage of daughters, buying a dream home etc. In a survey conducted by Geojit among our female customers in 2021, children’s education and daughter’s marriage were the top financial goals of women. This goal-specificity of savings differentiated women’s financial behavior from men’s.
Lack of women in investment decisions
Along with being good at savings, women also lag behind Investment. Financial history tells us that stocks outperform all other asset classes over the long term. But, only a small number of women invest in stocks and mutual funds.
Most women, even highly educated and qualified ones, leave investment decisions to male relatives whom they trust – fathers, husbands, brothers. Our customers are economically literate class. Even their male relatives take investment decisions for them. Our survey found that for 33 percent of our female clients, their male relatives made investment decisions.
Women, in general, are risk-averse
Women avoid risky investments. Only a small minority invests in stocks. Financial literacy is lower among women than men. Women prefer gold and bank deposits over stocks. This means they are missing out on the best performing asset class.
Risk aversion also has its benefits. Even among women equity investors, traders are a minority. It is a fact that a large number of traders/speculators lose money in the stock market. Since women do not speculate, they do not lose money like male traders. This is a clear positive.
Women have the nature to be great investors
There is a saying in the stock market, “To make money from the stock market, you need the intelligence of an average man, but the patience of ten people.” It is true that women have more patience than men. So, potentially they can be great investors. There is a lack of financial literacy, especially knowledge about the different asset classes and their risk-return profile.
More women are entering the stock market
The explosion in retail investor accounts is a major post-pandemic development. Brokerage firms are reporting a sharp jump in female client base. The female subscriber base in Geojit now stands at 29 per cent.
Shares in India have outperformed all other asset classes in the long run. The BSE Sensex (100 in 1979) has now risen above 60,000 (October 2021), giving a CAGR of around 16 per cent. This is about 8 per cent higher than the 7.35 per cent CPI inflation during this period. Stock market returns have clearly outperformed returns from competing asset classes such as gold and bank deposits.
Successful investors are those who invest in good quality stocks/mutual funds and have the patience to stay invested for a long period of time. Women have more patience than men; So that they can become the best investors. Therefore, the current trend of more women entering the market is healthy and desirable.
(Author, Dr VK VijayakumarChief Investment Strategist. Opinions are his own.)