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A female investor is a top woman

Investments
ABN AMRO

05/03/2024 • 4 minute read

Judith Sanders

Companies with more women at the top are doing better. The mechanisms behind this were recently examined and what did they reveal? "The traits that women add to top management are very similar to the traits that make women good investors," says Judith Sanders, investment strategist at ABN AMRO MeesPierson. "May this research encourage women to take the first step towards wealth accumulation."

Companies with more women in senior roles are found to be more profitable, more socially responsible and provide a good, high-quality customer experience - according to multiple studies.1 New research shows how this happens. Sanders: "Researchers analysed2 163 companies and looked at what happened after women joined a top management team. What was striking was that these companies tended to shift focus: from mergers and acquisitions to internal research and development. Companies were also more open to change, while at the same time trying to reduce risk." 

Good basis for investing

"If we look at investing, it turns out that a so-called feminine approach can lead to better portfolio returns," Sanders continued. For example, a strong similarity between top women and female investors is that they are generally more risk-conscious3 than men. They are often more concerned with limiting losses: a reason to spread their investments well."

Sanders sees more similarities with top women: "Investing women immerse themselves more in the companies they want to invest in. In doing so, the focus is less on quick profits. As a result, they generally make fewer transactions4, resulting in lower transaction costs. Women in top management also look less at short-term profits through, for example, acquisitions or mergers."

The result for the investment portfolio? Several studies, including from US financial services firm Fidelity Investments5 show that women who invest do so even better than men. On average, women's returns are 0.4 % higher than men's. "This can eventually add up to a thousands of euros difference," Sanders points out. "So all in all, a good basis for successful investing." 

Women are catching up

And that comes in handy. After all, women face a financial gap. This means that women are less likely to have a financially healthy future than men.6 Women in particular benefit from wealth accumulation or investing. Sanders: "Due to their often lower salaries and on average shorter working weeks, women build up fewer assets in key years. They also make less use of the available assets for wealth accumulation, our own data7 show. While wealth accumulation can actually be a good way to reduce this financial gap."

Fortunately, we see that women are catching up, and that starts in terms of education. Whereas halfway through the last century twice as many men as women were studying in higher education, that distribution is now almost equal, reports CBS. Sanders: "As women complete higher education and then hold good positions, they are also becoming more aware of the importance of being financially independent. As a result, you can see that they are becoming more interested in the financial markets and we are seeing more and more women investing." 

Financial independence

Only, women still invest less often than men. "However, what we see is that within pilot investing, women did manage to find their way to investing," Sanders continued. The pilot investment trial8 is an ABN AMRO initiative where people can learn to invest in a safe environment. In other words, without any direct financial risk. Moreover, start-up investors can learn how investing works and get acquainted with the risks. "The data from this pilot show that relatively many women took part in it: 44% of the participants were women," she said. 

"So we see that women are more likely to start investing in a safe environment where there is also the opportunity to gain experience," Sanders said. "This is a way that apparently works to encourage and put women on the road to greater financial independence." It is one of ABN AMRO's initiatives aimed at women that connect with, for example, appropriate communication, a learning environment and female role models.

The first step is the hardest

Sanders: "So by removing certain barriers that investment entails, women do appear to be interested in it, and even take the step to create an account and build a portfolio. And let me underline again: for investing itself, they certainly don't have to be inferior to their male counterpart, quite the contrary."

However, we are not there yet, because now the step to practice has yet to be taken. Once the step has been taken, the biggest hurdle also seems to have been cleared. Sanders: "I therefore hope that women looking for greater financial independence will be inspired by these top women. And by the fact that they have everything they need to invest well. In that respect, I have every reason to be optimistic."

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