New research shows that young women are the fastest growing cohort of investors Exchange Traded Funds in Australia, sparking suggestions that the gender investment gap could be narrowing.
According to global asset manager State Street, back in 2001, fewer than one in 10 new Exchange Traded Fund (ETFs) investors were women. Fast forward to today and now one in four (26%) of ETF investors are women.
Now I hear some of you saying, whoopee-do, only 26% of women are investing in exchange traded funds – that’s still small!
Yes it is small and yes, that’s significantly less than men, but let’s put some perspective on what it actually means for economic equality:
1. More women are building wealth
2. Women will have to be considered from a product development perspective
3. Female financial skills, smarts and confidence is increasing.
State Street believes that based on this trend gathering continuing that women could be close to parity for ETF adoption in the next five years.
“Young women are the fastest growing cohort of ETF investors in Australia, showing that the gender investment gap may be closing,” says Meaghan Victor, Head of SPDR ETF Asia Pacific Distribution.
So why is this happening?
The trend is gathering pace because the cost of investing is low and the ability to access these products is relatively easy. Plus, it’s a bit like buying a bucket of investments with the one vehicle.
Bit of background on ETFs
ETFs were born out of the US stock market crash of 1987 as a tool for institutional investors to invest their cash reserves.
They were introduced to Australia on 27 August 2001 with the launch of the SPDR® S&P®/ASX 200 Fund (STW) and SPDR® S&P®/ASX 50 Fund (SFY).
How ETFs compare to other asset classes
Today, ETF investors have on average $170,000 invested in ETFs, ranking third after Australian shares ($235,000) and investment property ($205,000) but ahead of term deposits ($100,000), international shares ($90,000), and unlisted managed funds ($60,000).
Cryptocurrency, commodities, and fixed income products are less popular with ETF investors with just $5,000, $15,000 and $50,000 invested in these products respectively.
How ETFs can perform
Long-term ETF investors said ETFs were the best product to take advantage of market downturns (up 57% cite this), over international shares (7%) and Australian shares (10%).
In the past 12 months, ETF investors said they had vastly increased their portfolio allocation to the product.
Millennials (+68 percentage points or ppts) when compared to Baby Boomers (+45ppts) were more likely to have implemented a net increase in their allocation to ETFs in their portfolio allocation as a result of the coronavirus pandemic.
From a wealth building point of view, ETFs are an asset class that can help women with their financial security but individual research is always needed. Ease of access appears to be something that’s working for younger female investors, who indeed perhaps see these assets as a cheaper alternative to an inflated property market.
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