Lifecycle investing for women can help female investors make their wealth work harder. Using lifecycle stages as an investment framework is a way for women to adjust their investment strategy to match the specific needs of each stage in their life. Financial institutions can use this approach to tailor their advice to female investors and help them build up more capital over the long term.
Women have distinct financial needs in each phase of their life. The idea of lifecycle investing for women is to break down investing into different life stages. At each phase, women can adjust their investment strategy to reflect their financial goals and needs as they evolve over time. Central to this approach is to assess risk in relation to your needs at different points in life.
Time to reassess your relationship with risk
Female investors can often benefit by taking a new look at their investing philosophy when it comes to risk. Reflecting their emphasis on financial security, women tend to be too risk averse once they start investing.
But in markets, returns are the direct result of taking risk. The outcome is that women too often end up with not enough equities in their investment portfolio. This puts them at a clear disadvantage in growing their capital over time in a low interest rate world.
Take action at any age
Of course, every woman is different. Yet looking at broad trends in women’s life cycles can offer some clues into how to rethink investing. It is never too late: female investors can take action at any age to make their wealth work harder.
The gender investment gap exists because women tend to earn less, take time out of the labor force to raise families, and live longer.
Our data shows that women tend to take less risk with their money, when they choose investments. Women also tend to hold larger proportions of cash. Yet, this means that female investors may often miss opportunities to put their wealth to work.
To compound the effect of investing less, women also live longer. So doing something about the gender gap in investing is crucial to helping women live well in older age.
Taking account of the “XX factor” in investing
It is time that financial institutions did more to acknowledge the specific investment needs of women. Female investors need relevant and meaningful financial advice that is tailored to their specific needs and personal situation. This is the inspiration behind this new take on investing.
We outline the key things women can do to improve their financial situation in a new report, Woman to woman (PDF).
The report’s author, Nanette Hechler-Fayd’herbe says, “It is essential to understand the evolution of women’s needs through the lifecycle stages. Adjusting their investment strategies to reflect those phases will enable them to make the most out of each investing stage to help them build a more secure financial future.”