How Do Women Really Invest?

A closer look suggests that income, rather than gender alone, may be the real determinant of women's investing choices

Christine Benz 8 March, 2021 | 11:09AM
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“Women invest less aggressively than men.” How many times have you heard that assertion? And indeed, numerous studies point to women putting less money in the stock market than men. 

But a closer look at the data suggest that women’s lower average incomes - rather than gender-related risk preferences - are the key driver behind their lower average allocations to stocks. Women earn less, on average, than men. And not surprisingly, people with lower incomes invest less in stocks than do higher-income people. That skews the data on women’s average savings rates and equity allocations downward. But after controlling for income, it appears that women contribute as much to their retirement accounts and invest just as much in stocks as men at the same income levels.

That suggests that the key area of concern for women’s financial health relates to income rather than any sort of risk aversion that’s specific to women.

Digging into the Data

It can be difficult to draw conclusions about how people invest, or how much. There’s no central repository of information about investing behaviours for women or men. Any hard data is siloed by investment provider and account type and may not be representative of the population as a whole.

Moreover, numerous factors may influence investment decisions: income, education level, marital status, age, and gender, to name some of the key ones. That makes it difficult to untangle what role gender plays in investment decision-making.

To help shed some light on these issues, I delved into available research to look at women’s investing behaviours in three key areas: contribution rates, equity weightings, and willingness to use professional advice. I focused on retirement-plan participants in an effort to remove the noise of people saving for goals other than retirement. The conclusion? Women do indeed appear to exhibit different behaviors than men in each of the three areas. But many of those trends decline or melt away altogether when the data are adjusted for demographics, especially income level.

Exhibit 1

Participation/Savings Rates

Women have fewer financial assets and lower company retirement plan balances, on average, than their male counterparts. Data also indicate that men contribute to their company retirement plans at a higher rate than do women.

Yet intuitively, those differences appear to be related to income levels: Women save less, on average, because they earn less on average. In Vanguard's How America Saves research, for example, women with incomes of less than $29,999 had lower pension contribution rates than males at that same income level. But at every income band over $30,000, women actually invested more than males at that same income threshold. For example, women with incomes between $75,000 and $99,999 contributed 8.3% of their salaries, versus 7.8% for men at that same income level. Morningstar's David Blanchett drew a similar conclusion from his research: after controlling for demographics, the differential in contribution rates between men and women was just 0.01%.

Men were more likely to contribute the maximum allowable amount to their company retirement plans, according to Vanguard’s report - 11% versus just 8% for women. But here again, that differential likely owes to income differences: Because of men’s higher average salaries, they likely have greater wherewithal to contribute the maximum allowable amount.

Investing Choices/Asset Allocation

What do the data say about investment choices--specifically, the oft-cited assertion that women are more conservative than men? The available research suggests that the answer here, too, is nuanced.

Women allocated their pensions more conservatively than men, according to a 1996 study by Vickie L. Bajtelsmit and Jack L. VanDerHei. After examining investment choices for 20,000 management employees at a large US employer, the researchers found that women were more likely to invest in fixed-income investments than their male counterparts and less likely to invest in employer stock. At the same time, the study’s authors pointed out that they were missing information on the household’s wealth and marital status, which could be contributing factors to the participant’s allocation choices.

But a 2008 study by Ann Marie Hibbert, Edward Lawrence, and Arun Prakash found that single men and single women with the same educational attainment (at least a graduate-level degree) tended to invest similarly; single women included in the survey were no more risk-averse than single men.

Vanguard’s data paint a similarly complicated picture of allocation choices by gender. Of the company retirement plan accounts included in the firm’s latest survey, the average and median equity weightings were roughly in line for both male and female employees’ accounts. For example, the median equity weighting for accounts held by male employees was 84%, versus 83% of females’ accounts. 

In the data set he examined, Blanchett looked at company retirement plan participants who were self-directing their own accounts. He found that the average equity allocation for self-directed female participants was 72%, versus 76% for men. However, after controlling for demographics, including income, the gap shrunk to less than 2 percentage points.

Willingness to Ask for Advice

What about the likelihood that women will rely on professional investment advice relative to men?

Women were more likely to rely on a professionally managed solution for their investments, according to Vanguard’s report. Some 40% of female-owned accounts in its survey included a target-date fund in 2019, versus just 35% for male-owned accounts.

Blanchett found a similar pattern in the data set he examined: 34% of women retirement plan participants went the self-directed route (that is, eschewed target-date and managed account offerings), versus 41% of men. But he notes that higher-income participants are generally more likely to self-direct their allocations. That means that the differential in advice-seeking by gender was pretty minor overall. Adjusted for income and other factors, women were still more likely to rely on professional management then men, but the difference was fewer than 3 percentage points.


The takeaway from the available data is that income differentials explain many of the gaps in investing choices that men and women make. Addressing income differences is key to healing the gender gap with net worth and retirement savings. Of course, that’s easier said than done. 

On a more hopeful note, the Vanguard data also point to the success of default contributions (the introduction of auto-enrolment in the UK, for example) in ensuring that women of all income levels contribute enough and take appropriate levels of risk in their portfolios.

Finally, the research suggests that financial advisers shouldn’t assume that their female clients are more risk-averse than their male clients. A 2005 study suggested that financial advisors often did just that, even for male and female clients with the same levels of wealth. Based on the data, such an approach doesn't appear to be warranted.

This article was originally written for an American Audience

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Christine Benz

Christine Benz  is director of personal finance at Morningstar and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances.

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