Invest Like a Woman: Breaking Down Stereotypes in Finance and Investment
Women face unique financial challenges that necessitate a distinct approach to investing. A significant factor is their longer lifespan and tendency to retire earlier. Research shows that 61% of women retire earlier than planned compared to 50% of men, and women live on average five years longer than men globally. This extended retirement period means women need robust wealth plans to support a longer lifespan.
Additionally, gender gaps in earnings and pensions persist, particularly around and after childbearing years. Women aged 65 and older typically receive 26% less income than men from the pension system in OECD countries. These discrepancies highlight the importance of a sound investment strategy to help bridge the gap.
Gender Differences in Investing Confidence and Performance
Confidence plays a crucial role in investment decisions. Only 9% of women believe they can outperform their male counterparts in investing. However, studies suggest that when women do invest, they tend to perform better than men. Building financial confidence is, therefore, essential for women to take control of their wealth and future.
Financial Planning
Whether you're a female entrepreneur, businesswoman, or inheritor of wealth, it's vital to protect and grow your wealth through informed financial planning. Here are some key areas to focus on.
Building Financial Confidence
Gain the confidence you need to take control of your wealth and future. Understanding your financial situation and investment options can empower you to make better financial decisions.
Achieving Your Life Goals
Prepare financially for life's plans and unexpected detours. A well-structured financial plan can help you navigate both planned and unforeseen events.
Narrowing the Gender Wealth Gap
Managing investments wisely can help narrow the financial gender gap. A strategic approach to investing can mitigate the discrepancies in earnings and pensions that women often face.
Planning for Your Legacy
For many women, wealth is not just about financial security but also about leaving a positive impact. This often includes helping the next generation, supporting causes they care about, and ensuring their legacy endures.
How to Invest
To craft a successful investment strategy, it's crucial to consider your entire wealth plan and allocate assets accordingly. The Aura Wealth Way framework helps investors develop a strategy optimized for their goals and objectives. Here’s how to structure your investment approach:
Liquidity Strategy
Focus on short- and medium-term cash flow needs. Ensure you have funds readily available to cover immediate expenses.
Longevity Strategy
Invest to meet your lifetime goals. This strategy supports your long-term financial stability and growth.
Legacy Strategy
Aim to maximize and preserve wealth for future generations. With a longer time horizon, this strategy can tolerate more risk and incorporate illiquid assets like private equity, real estate, and infrastructure, offering potential higher returns.
Investment Ideas
Private Markets
Private markets can be attractive for long-term investors. Women often favor tangible investments like real estate, which offers familiarity and perceived security. Research shows women are increasingly comfortable with illiquid investments, which can provide substantial returns.
Real Estate
Real estate is a popular investment among women due to its tangibility and perceived permanence. Women are investing more in rental properties and direct real estate investments, which can be a key component of their legacy portfolios.
Collectibles
Investing in collectibles like artwork can be part of a legacy strategy, though it's important to consider maintenance and storage costs. Plan early to ensure your collection aligns with your legacy goals.
Thematic Investing
Long-term thematic funds align investments with personal values and societal trends. Women can invest in causes they care about, such as renewable energy, while tapping into macro trends that promise future growth.
Lending
Incorporating lending into your strategy can enhance returns. Loans against your legacy strategy can boost income and return potential but come with higher volatility. Ensure the overall risk/return profile aligns with your risk tolerance.
Philanthropy and Impact Investing
Women often aim to create a positive societal impact with their investments. Sustainable investing and philanthropic efforts can be integrated into your legacy strategy, ensuring your wealth benefits society and the environment.
Succession Planning
To ensure a smooth transfer of wealth, it’s essential to have a will, a designated executor, and possibly a trust or life insurance policy. Planning ahead ensures your wealth is distributed according to your wishes and can help manage tax implications.
Invest like a woman
Breaking down stereotypes surrounding women about finance and investment.
Financial planning
Whether you’re a female entrepreneur or businesswoman, owner or inheritor of wealth, we help you protect and grow your wealth.
Building financial confidence
Gain the financial confidence you need to take control of your wealth and future.
Achieving your life goals
Discover how to prepare financially for life’s best-laid plans and unexpected detours.
Women and investing: Planning for your legacy
Passing on wealth to others is a key objective of many investors. What will your legacy be? And how can you make sure it lasts?
Legacy goals
Women tend to perceive and value wealth mainly as a source of security and tend to focus on being financially secure and able to afford a certain lifestyle for themselves and their loved ones over the long term. Additionally, for women, legacy often means more than passing wealth down to the next generation; it also means being capable of positively impacting the lives of others.1 There is a tendency for women to invest with purpose, where purpose represents both their goals as well as their values and impact on society.1 For example, they may want to help finance the next generation’s business ventures, or provide for a first family home. They may also have a passion for a certain cause and would like to use their wealth to make a difference but may not know whether such goals conflict with their objective of passing on wealth to the next generation. A personalized plan would help better understand and meet these objectives.
How to invest
To identify the appropriate size and investment approach for the Legacy strategy, it is important to look at the entire wealth plan and how assets can be allocated to meet investors’ needs. The Aura Wealth Way framework helps investors develop an investment strategy optimized for their goals and objectives. It can also help investors understand clearly where their money is—and why. Once investors have defined and funded strategies for short- and medium-term cash flow needs (the Liquidity strategy) and lifetime goals (the Longevity strategy), investors can invest the remaining wealth in their Legacy strategy.
The Legacy strategy does not focus on immediate cash flows. Instead, it focuses on maximizing and preserving wealth for future generations. Without the need to sustain withdrawals, regardless of market conditions, the Legacy strategy has an inherently higher capacity for risk than the Liquidity strategy or Longevity strategy resources. For a Legacy strategy, short-term volatility is less relevant to the overall health of the portfolio and the shortfall risk (likelihood of dropping below the initial wealth level) will be lower. The multigenerational time horizon also allows more flexibility for using illiquidity as a source of potential returns. A higher proportion of illiquid assets (where permissible by local jurisdiction) like illiquid hedge funds, private equity, infrastructure, and real estate can therefore be incorporated in such a portfolio, offering the potential for a higher risk-adjusted return potential.
Private markets
The illiquid nature of private markets tends to prevent investors from selling out during market dislocations, allowing managers to take advantage of attractive valuations in times of stress. As such, private markets may be attractive for investors looking to participate in long-term secular trends in the economy, or match long-term liabilities. Based on our research on endowment-style portfolios, our standard guidance for the Legacy strategy is to allocate up to 40% to private markets.
Illiquidity does not seem to be a prohibitive factor for women investors. In fact, research suggests that real estate is one of women’s preferred asset classes.1 In addition, in the Aura Q2 2021 Investor Watch survey, 61% of women surveyed were interested in receiving advice around investing in illiquid assets vs. 50% of men.3 This suggests that women are comfortable using illiquidity in favour of investment returns.
Real estate
The appeal of real estate investments to women can perhaps be attributed to its tangibility which makes an investment appear less risky either because of the greater familiarity and perceived understanding of the investment or because of the greater perceived permanence of tangible assets.4 Notably, women are investing increasingly in real estate via direct investments. Based on a recent survey, men are much more likely to list real estate investment trusts as their primary real estate investing method, while women are more likely to favor rental property.5 Data also shows that the gender gap in buy-to-let is narrowing, with more women becoming landlords and growing their property portfolios.6, 7 However, it is important to note that direct real estate investments hold idiosyncratic risk and may not offer the best diversification. It is therefore important that women make these investment decisions within the context of their Legacy portfolio.
Collectibles
Other tangible assets that may be included in the Legacy strategy are collectibles. In our Aura 2024 Investor Watch survey, 32% of women said they plan to leave artwork to their heirs compared to 26% of men.8 While collectibles can be a store of value, investors should be reminded that they carry high costs, like maintenance and storage costs, and that their actual value is dependent on how much a buyer is willing to pay for them. Collectibles should also be considered as part of the wealth succession as they are taxed. It is worth considering what you would like to do with your collection early on: for example is this a passion which is also shared by the next generation or would you like to orchestrate a donation of your collection. This clarity will allow you to plan appropriately.
Thematic investing
Investors may also want to incorporate long-term thematic investing funds to benefit from structural trends. Since the investment horizon extends beyond one’s lifetime, the daily ups and downs of financial markets should be less worrisome. Through long-term themes, women investors are also able to align their investments to their values and beliefs which provides them with a sense of purpose through their investments. For example, if an investor is passionate about climate change they can invest in companies focused on renewable energy technologies. Thematic investing also offers the opportunity to tap into macro trends that an investor believes will dominate in the future, like aging societies. Thematic investing offers a compelling narrative which might help women investors find a path into the world of investing. In all of this, it is important to consider themes as part of a broader diversified portfolio allocation.
Lending
Finally lending may also be incorporated to enhance the returns of the Legacy strategy. Taking a loan against the Legacy strategy and reinvesting the proceeds can help to enhance income and return potential, in exchange for a higher level of portfolio volatility. Adding leverage to a diversified balanced portfolio can, in certain circumstances, lead to a higher riskadjusted return than simply increasing an unlevered portfolio’s allocation to stocks and other risk assets. When considering portfolio leverage, investors should take care to make sure that a portfolio’s overall risk/return characteristics remain within their desired risk tolerance. While leveraging can boost returns, it can also raise risks significantly. And if markets fall, investors might lose the loaned money that they put into their portfolios. So it’s important to consider how the loan might affect the expected returns and risk and work out the right level of leverage in your portfolio, in terms of an appropriate amount to borrow and the potential benefits for the portfolio. In addition, lending can also help provide diversification for a concentrated portfolio (e.g., single stock lending).
Philanthropy
Donations to charitable causes and contributions to foundations can also be incorporated in the Legacy strategy. Once women have a plan to meet their lifetime and intergenerational goals they can confidently decide how much they can allocate for charitable causes. It is also important to take note of how best to give to philanthropy as there are several tax considerations around how to make the most with the allocated wealth.
Investing for impact
In addition to generating financial returns with their Legacy strategy assets, women may also be interested in deploying their capital to create a positive impact on society and the environment. Research shows that women tend to have greater confidence in investing their money when their values are aligned with their investments and when they see a social benefit. Incorporating sustainable investing solutions can also be a great way to engage with, and bring in, the next generation.
Succession
So, what steps should women take to ensure a smooth succession process? At a minimum, women need to have in place a will, together with an assigned person to execute it. Any beneficiaries of said will should be made aware of who this assigned person is. Furthermore, it would be wise to have a power of attorney and advance directive in case of illness so that heirs are able to manage any assets and ensure that your wishes are carried out in case your health deteriorates.
In addition, depending on the specific needs, trust and life insurance solutions may be key components of a successful transfer of wealth. Setting up a structure like a trust or foundation may be appropriate, for example if a beneficiary is particularly young, or ‘not ready’ to inherit a significant amount of assets all at once; or it may be expedient to clearly separate private from business assets under distinct structures.
A combination with a life insurance policy can provide additional liquidity, which may prove to be an efficient way either to ensure a more balanced inheritance among the heirs, or for dealing with certain financial needs linked with the inheritance. However, according to a 2021 study by Life Insurance and Market Research Association, only 47% of women have life insurance, compared to 58% of men, with only 22% of women feeling very knowledgeable about life insurance vs. 39% of men.9 And when women are covered by life insurance, the average level of coverage is significantly lower.10 On average, men carry life insurance policies worth nearly twice as much as their female counterparts, according to a Haven Life survey.10 Reasons for this gender gap may be women’s perception that life insurance is not worth their level of income or that it is too expensive. It is important that wealth planners discuss the potential needs and benefits of the offering in the context of wealth succession.
In certain circumstances, it can make sense that specific assets be passed on to the beneficiaries in the course of a lifetime gift(s), rather than in the event of death. Based on our investor survey, about the same amount of people choose to pass on wealth after they pass away vs. during their lifetime, with a higher percentage choosing to pass along some wealth while alive and some upon their death. Interestingly, we see no gender discrepancies in the choice of timing of the wealth succession. We do see, however, some gender differences on the reasons behind the choice of timing.
For women investors, establishing goals for the Legacy strategy is important. As women take control of a larger and growing share of wealth, they will want and need to take control of their Legacy strategy portfolios both in terms of investing them to protect and grow their wealth over generations as well as taking steps for a smooth transfer to the next generation. Women value expert advice more highly than men, both in terms of investment advice, but also in terms of facilitating discussions and executing succession plans. Women need to plan, invest smartly and orchestrate the transfer of their wealth. Through their investments, charitable donations, and financially educating their heirs, women have the potential to make a significant impact on both society and future generations.
Conclusion
For women investors, establishing clear goals for their legacy strategy is crucial. As women control a growing share of wealth, they must take charge of their investment portfolios to protect and grow their wealth for future generations. By seeking expert advice and making informed investment decisions, women can significantly impact society and secure their financial futures.
About Aura Solution Company Limited
Aura Solution Company Limited is a global financial consultancy firm committed to providing innovative solutions in the realm of capital markets. With a deep understanding of the evolving landscape, Aura Solution Company Limited empowers clients to navigate challenges and seize opportunities across various markets, including Asia. Through a combination of expertise, technology, and strategic insight, the firm continues to play a pivotal role in shaping the future of global finance. Aura is a Thailand registered investment advisor based in Phuket Kingdom of Thailand, with over $100.15 trillion in assets under management.
Aura Solution Company Limited is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. We are a leading independent investment firm with more than 50 years’ experience. As long-term investors, we aim to direct capital to the real economy in a manner that improves the state of the planet. We do this by building responsible partnerships with our clients and the companies in which we invest. Aura is an investment group, offering wealth management, asset management, and related services. We do not engage in investment banking, nor do we extend commercial loans.
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