With this edition of ASX Investor Update published just before International Women’s Day, it’s worth reflecting on the growth of female investors in Australia, the impacts of this change and the possibilities ahead. 

The latest ASX Australian Investor Study estimated that 4.3 million women in 2023 had investments – up 600,000 since 2020. More Australian women [are] investing outside their primary residence and superannuation  than ever before,” the report noted. 

Women now comprise half of all new retail investors on ASX – a remarkable change from years past when men dominated retail investing. Moreover, half of all investors who intended to invest in the next 12 months were women, the study found.

Although these trends are heading in the right direction, more needs to be done. Overall, male investors in Australia continue to outweigh female investors (58% to 42%) and have a larger average portfolio size. Almost a third of female investors had a portfolio balance below $50,000 compared to about a fifth for men. 

According to the study, the average age of female investors was 47 and the median portfolio size was almost $96,000.  Women tended to be more risk averse when investing than men, preferring stable, reliable returns over high-risk investments. Their portfolios were less diversified compared to men, a result of holding fewer investments on average.

Strong momentum

Caroline Gurney is not surprised by the increase in female investors in Australia. “For women and men, it’s so much easier and cheaper to invest these days, and there is a lot of good information about investing available online. Through different apps, people can even round up and invest their spare change in the sharemarket, allowing them to save while they spend.” 

Rising housing costs are another factor behind the growth in female investing, says Gurney. “Sadly, everybody these days knows how hard it is to buy a house or apartment in Australia, and how much it costs to live. Young people realise they need to start investing earlier in their life than previous generations if they want to save for a house deposit and have a place for their family.”

Financial independence and security are other drivers of growth in female investors. “It’s really worrying that the fastest growing group of homeless people Australia are older women,” says Gurney. “Some may have been divorced, not had superannuation or relied on their partner to make all the financial decisions. Even a small amount of investment early in a woman’s life can improve one’s financial independence and add to their financial security later in life.”

Building passive income 

Antipodes Partners portfolio manager Vihari Ross is one of the portfolio managers involved with Future Generation Women. She says COVID-19 was a catalyst for growth in first-time investors. “Retail participation in global equity markets exploded during COVID and is now at a record high. People were stuck at home and generally had a bit more time to look into their finances and start investing.”

Like Gurney, Ross says greater accessibility to investments partly explains the increase in female investors. “In the past, you had to do all this paperwork with a broking firm to get started. Now you can use an app on your phone and pay low or no brokerage. It’s no surprise that women have taken advantage of this.”

More “safe spaces” for female investors is another encouraging trend, says Ross. “I remember during my uni days when the investment club on campus only consisted of men. Or when buying or selling a share mostly meant a female investor having to deal with a male broker, which could be a barrier for some women to get started. Today, there are ladies’ investment clubs, more female advisers and so much financial information available for women through podcasts, blogs, ASX events and other channels.”

Ross says the ability to build passive income through investing is another attraction for women. She references Warren Buffett, one of the world’s great investors, who famously described the goal to make money while you sleep.

“Building wealth early in your life, even if only a small amount, could make a huge difference for women over their lifetime,” says Ross. “Women who begin investing in their twenties could have more options in their thirties. Creating passive income from an investment, and using that income to supplement your regular income, can change your life.”

Ross adds that investing to build passive income is not a gendered issue. “I believe this is a good idea for all retail investors to consider, particularly young adults who might want to take some time out of their career, and want to build up more financial resources to do so.”

Although investing early in one’s life potentially has many benefits, Ross says it’s important to recognise that not all women are able to invest. “Not everyone has spare dollars to put into the sharemarket or are in a position where they have time to build and monitor an investment portfolio. Other women may lack the confidence or support to get started. It’s fair to say that the women who are privileged to have the financial resources and time to invest are a subset of the population.”

Ross hopes that society won’t need to encourage female investing in years to come. “Women make up half the general population, so we should have an equal gender split of investors over time. Australia is heading in the right direction, particularly as more women graduate from university, create successful careers and start building wealth earlier in their life than previous generations.”
 

Getting started

Catherine Allfrey, a portfolio manager and director at WaveStone Capital, says the key to greater female participation in the sharemarket is education. WaveStone is also providing asset management services for Future Generation Women. 

“Nobody teaches you financial literacy at school, or how investing in shares, bonds or property over the long term could contribute to wealth creation. It’s really important for women to self-educate themselves about investing. There’s lots of good, free information out there from reputable sources to help women get started in investing.”

Allfrey urges first-time investors not to treat the sharemarket like a casino. “You don’t need to speculate in high-risk stocks to build wealth. Data shows that those that start investing early in life and invest a regular amount every month benefit from the power of compounding over the  long term.”

Diversification is critical, says Allfrey. “A useful rule of thumb when you start is not to have more than 10% of your portfolio in any single stock. Another option to consider at the start is using an active fund or Exchange Traded Fund that has a diversified portfolio, before investing directly in stocks.”

Allfrey says first-time investors should “socialise” investing. “Instead of having a book club, why not start an informal investment club with friends where you discuss investing? Ask yourself: what are some companies you think provide a really good product or service and have a greater customer value proposition. That can be a starting point to do more research on a stock before investing in it.”