Why women need to actively invest their money

Picture this: the year is 2030, we no longer have to wear a mask in the supermarket and can once again hug our relatives. Women will also possess two-thirds of America’s wealth.*

Over the next decade, an estimated $59 trillion* will have been passed on from Baby Boomers to Generation X and Millennials in the ‘Great Wealth Transfer’. 70% of this wealth will be inherited by women*. Sounds great, right girls? But at the same time, research shows that women are not only less likely to talk openly about money than men, but they’re less likely to invest their money to help it grow. Rock, meet hard place.

“Give a woman a dollar, and she can put it to good use. Teach her about how money really works, and she can change the world.” — Linda Davis Taylor, CEO of Clifford Swan Investment Counsellors

Back in the UK, the most recent figures from the Office of National Statistics shows individuals aged 34 or under opened 2.4 million ISA subscriptions (either cash ISAs or stocks & shares ISAs) in the 2017-2018 tax year**.

While slightly more young women than men subscribed to an ISA (1.29 million compared with 1.15 million), sadly the data shows that young women in the UK are also less likely to invest their money than men: the vast majority of women (1.2 million) opted for cash ISAs and just 85,000 stocks & shares ISAs**. This compares with 981,000 cash ISAs and 167,000 stocks and shares ISAs for the men**. Neither set of figures are exactly encouraging when it comes to long-term savings, but the men are once again ahead.

Why is this not encouraging? Because all the money pumped into the world’s economies to keep them afloat during the pandemic could lead to higher inflation. Not sure what that means for your finances and savings? I explain five different types of inflation and what it means for your wallet in our recent millennials video. If you’re looking for extra credit, I cover how to inflation-proof your investment portfolio in part two!

The basics of inflation eroding your cash is simple. If inflation is higher than your savings interest rate, your money is worth less over time. The amount looks the same, but it can buy you fewer goods and services. Here’s an example: if your cash ISA is paying you 1% (which is about average at the time of writing), and inflation is 3%, inflation is 2% higher than your interest rate. So goods and services are getting more expensive and your interest is not keeping up. £1,000 invested will have the buying power of just £942 in three years’ time. Over five years it will buy you £905 worth of goods.

Three global funds to kick start your investments

Scottish Mortgage Investment Trust ironically, has nothing to do with mortgages and actually has a top ten full of familiar names, such as Amazon, Tesla, Spotify and Netflix^. The trust recently updated its policy to allow for more investments in unlisted, or private firms, giving investors access to companies earlier in their development. The trust has returned 243.78% over the past 5 years compared to a sector average of 72.77%^^.

Newly rated Guinness Global Innovators is all about finding innovative businesses which are changing the world in which we live. A mix of familiar names and the less well-known, the fund focuses on nine themes: advanced healthcare; artificial intelligence and big data; clean energy and sustainability; cloud computing; internet, media and entertainment; mobile technology and the internet of things; next generation consumer; payments and FinTech; robotics and automation. It has returned 120.58% over the past 5 years compared to 63.83% for its average peer^^.

If you’re like me, and putting your money into sustainable funds is important, BMO Responsible Global Equity could fit the bill. Manager Jamie Jenkins is extremely passionate when talking about sustainability and I like the fact that the fund invests in companies actively targeting the UN’s Sustainable Development Goals, while at the same time also engaging with companies where there are problems to be resolved. I appreciate the level of investor engagement and feel my money is going to good use making positive change. The fund has returned 101.23% over the past 5 years compared to a sector average of 63.83%^^.

What to learn more?

As women are positioned to gain more financial autonomy, it’s important to ask questions and learn more. But whether you’re male or female, the big shift of money between generations requires knowledge. So, ask all the money questions and get the conversation started — this is exactly why FundCalibre’s millennial series was started. Use it as a resource. If you’re looking for somewhere to start, try our ‘Introduction to Investing’ five week course, week one starts here.

*Source: Bankrate, September 2018
**Source: Office of National Statistics, 2020
^Source: fund factsheet, 30 June 2020
^^Source: FE analytics, total returns in sterling, 5 Aug 2015 to 5 Aug 2020

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.