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Bridging the Gender Investment Gap Through Diversification (Part 1)

Between January 2023 and January 2024, the gender gap grew by £54bn, according to a study by Boring Money

In honour of International Women’s Day, we would like to take this chance to spotlight one of the biggest ongoing gender-based financial disparities: the gender investment gap. The gender investment gap highlights the differing investment behaviours and outcomes between men and women. 

Recent studies have highlighted alarming trends, showing that the gap is only widening. In response to this evident disparity, companies like Femaleinvest are stepping forward. They are tailoring their services specifically to meet the unique needs of women.

It also underscores the critical importance of portfolio diversification as a cornerstone for achieving financial gender equality. This exploration seeks to uncover the roots of this investment gap. While, also showcasing diversification not just as a strategy but as a fundamental step towards financial empowerment for women. By dissecting the factors contributing to this divide and advocating for diversification, we aim to pave the way for effective empowerment strategies, laying a foundation for financial resilience and growth. 

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Understanding the Gender Investment Gap: The current situation in the financial market

The gender investment gap illustrates the enduring financial inequalities in our society. Notably, European women invest 29% less of their monthly income compared to men, a disparity underscored by N26’s 2022 research. Yet, despite facing tighter budgetary constraints, women outpace men in savings by 28%, underscoring their prioritisation of financial security. This trend is further illuminated by the top three motivations for female investors:

What are the motivations for female investors?

Motivations for female investors, Gender Investment Gap

‘Top Motivation for Female Investors in Germany.’ Source: N26 Women and Investing Survey, 2022.

Men also seem to have easier access to financial topics. According to an ‘investment’ study conducted by Commerzbank in 2024, 48% of men stated that they felt knowledgeable about shares, compared to just 23% of women. The gap is similar in the areas of pension insurance, funds, and other investments. 

A recent survey by the investment research institute Boring Money in the UK underlines the extent of this phenomenon: it revealed that the gender investment gap increased by £54 billion to £567 billion between January 2023 and January 2024. Men invested £1.01 trillion, compared to £450 billion for women. This increase is partly due to more men aged 25 to 44 investing their money, while women in the same age group tend to favour cash or traditional savings.

Although savings books or call money accounts are relatively safe investments, they do not offer a particularly high rate of interest in the current economic environment, and in the context of inflation, it quickly becomes clear that the nominal return can hardly compensate for the loss due to inflation. Find out more about the current interest rate situation and inflation in Germany here.

The Root Causes of the Gender Investment Gap

The gender investment divide is deeply rooted in a complex interplay of income disparities and psychological barriers. As of 2024, it has been reported that, globally, women earn 84 cents for every dollar earned by men. The gender pay gap restricts women’s available capital for investments. And the motherhood penalty exacerbates this disparity, with mothers facing up to a 5% wage reduction per child. The Economist reported that, based on a 2019 study, in Germany, mothers earn an astonishing 61% less on average than they did before giving birth. 

This financial limitation, in part due to these circumstances, is further intensified by women’s higher perception of financial risk. Young women in particular tend to be more risk-averse and have less confidence in investing. This leads to the aforementioned preference for savings over investments. However, diversification stands out as a strategic remedy to these challenges.

The Power of Diversification

Diversifizierung des Portfolios mit Sammlerstücken

Investing is often associated with significant risks, deterring women who already face the financial and emotional burdens of family responsibilities. Diversification can help spread these risks, making investing feel safer and aiding in closing the gender investment gap.

Diversification is often highlighted as a crucial strategy for mitigating risks and aligning investments with personal goals and risk tolerances. FemaleInvest champions diversification for its role in minimising portfolio risks. And Forbes recommends diversification as a means to establishing a balanced portfolio. Such insights not only address financial anxieties but also encourages women to overcome barriers, fostering a more proactive and empowered approach to investing.

Investing in tangible assets like art, and collectibles is a strategic way to diversify and secure stable returns.

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We understand that true financial empowerment can only come from sound knowledge and confidence in one’s own decisions. That’s why we not only want to facilitate access to new asset classes, but also equip all our investors with the necessary resources to support them on their path to wealth creation.

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Keep an eye out for Part 2 to find out more.

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