1. Life events and situations
Many women’s life events and situations raise barriers to the creation of wealth. Apart from pay differences, career breaks and the greater need to work flexibly for childcare can also have a detrimental impact upon wealth. On average, women also tend to live longer than men, so their wealth-planning needs must often span a longer time horizon. In the US, women outlive men by an average of five years, and heterosexual women on average marry partners roughly two years older than they are. These circumstances affect women's financial situation and create specific needs, such as the need to address pension gaps.

According to a February 2021 survey from the National Institute on Retirement Security, around 60% of women (versus 51% of men) in the US stated they were concerned that they would not be able to achieve a financially secure retirement. In addition to long-term goals, research suggests that women also want more help with cash management and other day-to-day finance needs.

2. Investment risk tolerance
Often women are more reluctant to take financial risks than men, according to various research papers. This can also be seen in women’s pension allocations, which often favor bonds versus equities. According to a recent Nutmeg survey, just 3% of women are comfortable taking risks to achieve a good return, compared with 26% of men. Men’s favorite asset class is stocks, while that of women is real estate.16 Men also are twice as likely as women to hold crypto currencies.

Financial confidence is very closely associated with risk tolerance, which in turn depends on risk perception. Perception of risk shapes the expected utility curve and underlies the rationale for a person’s choices. Recent research has confirmed that greater familiarity with risk is associated with reduced risk perception. This suggests that more experience with investing should reduce risk aversion, and that if women do not gain investing experience, they will continue to perceive investing as riskier or more daunting. Knowledge also helps increase risk tolerance, most likely as it affects the perception of risk. Younger women are more financially literate, which makes them more financially confident. In a BCG survey, 70% of millennial women stated that they take the lead in making financial decisions versus 40% of baby boomer women.

3. Investment preferences, investment performance and purpose

Women are twice as likely as men to say that it’s extremely important that the companies they invest in incorporate environmental, social, and governance (ESG) factors into their policies and procedures. Furthermore, a preference for ESG investing isn’t limited to younger generations of women. A recent report from market researcher Cerulli found that the majority of women in the US under age 60 favor ESG investing.

The UBS Investor Sentiment Survey has also highlighted that more women (71%) take into account sustainable considerations when investing compared to men (58%).27 Women also seem interested in investing in women. For example, in crowdfunding we see more women investors investing in women-led startups.

Once women do invest, they tend to perform better than men. A recent study by the Warwick Business School concluded women outperformed men at investing by 1.8% per annum. This is largely because women trade less often, therefore incurring fewer trading costs, which subtract from market performance. Women also display less disposition bias, i.e., the tendency to sell at lows. During major drawdown events, the data suggests that women are around 25% less likely to withdraw their investments than men. They are also less likely to change their risk profile amid volatility and are in general more disciplined and invest in line with their goals. Women also spend more time researching information, are more likely to follow a plan, and less likely to try to time the market. They also benefit from more diversified portfolios. Thus, while men tend to put more weight on pure performance and make investment decisions based on historical performance, women tend to prioritize risk reduction and positive impact.

Read the full report Women and investing: Reimagining wealth advice 28 February 2022.

Main contributor: Marianna Mamou

This content is a product of the UBS Chief Investment Office.