Strategies for Women Investors
Over the past two years, the number of women investors has surged. Motivated by excess wealth buildup during the pandemic and a shift to hybrid work that has freed up time, women have become more engaged in their finances and are looking for a path to solid returns in uncertain economic conditions.
A recent report from Goldman Sachs Asset Management (GSAM) cited one provider who saw a 367% growth in women investors from February 2020 to February 2021.2
Looking at the decade ahead, the Boston Consulting Group expects women’s wealth to grow $5 trillion globally every year.3
However, while women are investing more, their account balances still lag those of men, according to GSAM.1
The current macro backdrop of modest economic growth, moderate public market returns and a higher cost of living is making it challenging for all investors to meet their financial goals—in the short and long term. According to a recent Goldman Sachs survey, top worries for US investors preparing for retirement are increased costs from elevated inflation and potential future reductions in Social Security payments.
But in addition to these overarching concerns, women face unique issues in building their investment portfolios including: lower earnings power, longer lifespans and a greater amount of time spent out of the workforce.
Let’s take a closer look at these challenges and some potential solutions that could help women bridge the gap.
Women’s unique challenges
Women’s lifetime retirement contributions fall 30% short of their male peers on average.4 Why? Consider this trifecta of contributing factors:
- Lower earnings power: Women continued to earn 82 cents for every dollar earned by their male counterparts5 and 21% less than men during their lifetimes.6
- Longer time in retirement: Women on average live three years longer than men. They are also more likely than men to retire earlier than planned due to health reasons, family care needs or job loss.7
- Time out of the workforce: In part because of taking on primary childcare responsibilities, women tend to spend nine years less in the workforce than men. According to Goldman Sachs research, two four-year periods out of the workforce can lower retirement savings by up to 35%.8
Additionally, while women have a growing need and appetite for financial advice, today they remain financially underserved. Nearly 70% of US women have never met with a financial advisor, compared to 41% of men.9
How can women bridge the gap?
Women can help maximize their chances of reaching financial goals by setting a strategic asset allocation for their investments. Here are a few potential practices to consider:
- Growing income: Following the great reset in fixed income yields, investors may be able to earn attractive coupons on bonds without having to take on significant credit risk.1 As the band of returns between equities and bonds has begun to narrow, the potential advantages of owning fixed income—predictable cash flows and diversification potential—have returned.1
- Allocating to return-generating assets: While fixed income assets are a critical risk-managing tool for portfolios, meeting long-term financial goals may require real portfolio growth. Equities tend to provide more capital appreciation than bonds, all else equal.
- Addressing volatility with alternative investments: Broad economic and market uncertainty makes financial planning, especially for retirement, difficult. Goldman Sachs analysts believe this decade will feature lower economic growth, higher rates and elevated inflation, resulting in more episodic volatility.1 Alternative assets such as real estate, private equity, hedge funds or private credit may provide differentiated return streams and potential for lower volatility to the market.1
Working with an experienced financial professional can help women, or any investor, determine the best allocation for their circumstances.
Speak to your advisor if you have questions about this. If you don’t have an advisor and are interested in learning more about Goldman Sachs Personal Financial Management, connect with us to learn more.
2 Fidelity, Robinhood, eToro, and Goldman Sachs Asset Management. As of March 1, 2023. Data reflects growth in new investing accounts during the COVID-19 pandemic.
3 Boston Consulting Group (BCG), as of April 2020.
4 US Government Accountability Office, The Gender Pay Gap and Its Effect on Women’s Retirement Savings, as of March 24, 2021.
5 US Bureau of Labor Statistics, Report 1097, as of March 2022.
6 US Senate Joint Economic Committee, Gender Pay Inequality, Consequences for Women, Families, and the Economy, as of 2016.
8 Administration for Community Living, 2018 Profile of Older Americans, as of May 31, 2019.
9 Ellevest, The State of Women’s Financial Wellness in 2022, as of August 2022.
Based on “Bridge the Female Investing Gap” Insights by Goldman Sachs Asset Management.
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United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.
The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.
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