Are female investors risk averse? New research busts myths

Turns out female investors aren't as risk averse as pop psychology may have you believe.

Are female investors risk averse? New research busts myths

Pop psychology often reduces the issues around achieving gender parity in business and finance to the inherent differences in the way men and women think, make decisions and lead.

Blanket statements range from ‘women are more nurturing and maternal when it comes to their management styles’ to ‘women are less aggressive than men, which holds them back from demanding pay rises and promotions’.

Women too competitive at work, but not competitive enough

A popular assumption in the world of investment is that women are seen to be risk averse, which automatically puts an entire gender of qualified, talented, and sharp investors in box with a glass ceiling.

The finding that men are more inclined to take risks than women has been repeated in hundreds of studies over the years, across continents, cultures and languages.  Researchers point to economic and evolutionary reasons for this, and a recent study went on to reveal that the gender differences around risk taking is wider when people are under stress.

In stressful situations, men take more risks, while women take less.

The main reason for this general trend has to do with gender differences in brain activity involved in analysing risk and preparing for action. This suggests in a stressful, deadlines and sales targets-heavy work environment, men may be too reckless, and women may be playing it safe when it comes to decision-making.

This research, by extension, could make a stronger case for a 50-50 gender split in organisations. When under stress, teams of men and women would most likely make smarter decisions than a team that in heavy in one gender alone.

A recent investor study of over 1,000 retail investors, carried out by online investment platform SyndicateRoom, reveals an interesting take on the gender disparity in investing; online platforms reduce inequality in male–female participation in equity markets by 20 percent.

The study also revealed that women are twice as likely as men to be dissatisfied with traditional brokers, which again nudges them towards digital platforms.

Measuring levels of satisfaction among investors, SyndicateRoom found that 8 per cent of investors were dissatisfied with brokers, as the pressure of high management fees paired with dwindling interest rates continues to mount. Among female investors, this level of dissatisfaction rose to 11 per cent – more than twice that of males.

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Female investors were therefore found to be much more likely to seek out alternative platforms through which to invest their money. SyndicateRoom’s research found that only 56 per cent of women in the UK would consider making equity investments through any method, compared to 65.5 per cent of men. However, when talking solely about investing online, that gap reduces to a smaller divide, with 48 per cent of male investors using a digital platform, compared with 42 per cent of female investors.

Additionally, it found that in 2017, men are 17 per cent more likely to access the equity markets than women – but for those using online investment platforms, that male–female divide is reduced by a fifth, again highlighting the role of online investment platforms in breaking down barriers to investing.

For entrepreneur, investor, and advocate for gender parity, Sherry Coutu CBE, news that online investment platforms are helping to get more women interested in both investing in and raising finance for British businesses is indicative of shifting gender perceptions in the UK–for the better. “With an impressive 42 per cent of female investors participating in online investing, the potential of online platforms to further financial inclusion by bridging the gender divide is unparalleled,” she adds.

The SyndicateRoom research challenges the idea that an entire gender may behave a certain way when it comes to making investment decisions by revealing how new technologies that bring new ways of thinking about equity investing could narrow the gender gap. Most researchers agree that perception bias can always skew the way we assess data. Women are perceived to be more risk averse, so they are–and the women who challenge these gender studies by taking bigger risks may be at a disadvantage when looking for support for their decisions because of sweeping gender assumptions.

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