/ Dr. Steve Heinke (translated from German by Laura Wiles)
Why do women invest less in stocks?
Although women have increased their financial independence in recent decades they have been less willing than men to take risks when making financial decisions. Find out more from Dr Steve Heinke at the University of Basel.
The proportion of women in professional life is increasing significantly. According to the Swiss Federal Statistical Office (2020), only 72% of women aged 25-35 years were in employment in 1991 compared with 88% in 2019. This growth is mainly due to highly qualified and better-paid jobs. In 2019, 54% of women aged 25-34 years had a university degree or higher vocational training compared with 51% of men of the same age and only15% of women (36.8% of men) aged 65+.
Women have therefore increased their financial independence in recent decades. Following on from this development, women also make many financial decisions; however, women are exposed to greater financial uncertainty than men because they live longer and on average work fewer years (Lusardi & Mitchel, 2007).
The current state of research into differences in financial decisions between women and men is surprisingly scant. However, it is well known that men are generally more willing than women to take higher risks when making financial decisions in experiments (Charness & Gneezy, 2012). Men also invest more frequently and a higher proportion of their assets in riskier investments (Fisher & Yao, 2017), although in the example of stocks this is also associated with more frequent switches, thus reducing the rate of returns (Barber, 2001). On the other hand, increased income insecurity among women (Fisher & Yao, 2017) leads to an increased need for secure investments.
Social values and norms are also seen as a cause of gender differences, leading to a division of roles whereby women make investment decisions less often. As a result, women often have less experience with such decisions, so the perceived risk of an investment decision appears to be higher. This means that women make fewer investment decisions and in studies have shown a lower level of financial literacy, plan less for their retirement, and therefore have fewer pension assets at the end of their working life.