Investor

If we picture an investor, the first image that comes to mind is a businessman in suit and tie. Yes, a businessman rather than a businesswoman. A businessman surrounded by other businessmen seeking for other men to do business with. But where and when do women appear in this ecosystem? The answer to this question is why this entry exists.

An embarrassing 23% of investment professionals are women, leaving no doubt that the profession is gendered. Beside professional investors, everyone has the opportunity to invest their savings to ensure present and future financial stability. In more technical terms, investing will increase your wealth whilst providing some immunity against inflation. And you already guessed, women are much less likely to make this type of investments: 41% of women are willing to take the risk as opposed to 55% of men. The status quo is so strong, that even research articles assume a higher percentage of men investors in their investigations.

Risk aversion is one of the personal traits attributed to the feminine personality. Risk aversion is destructive to investing since risk-taking is precisely what an investment is. Some women do not adhere to this gendered social prescript and dive into the world of investing. Even then, however, gender differences can be noticed. Risk averse behaviour is confirmed in real-life investing environments, where women are shown to be less likely to invest in young and high tech firms (which are notably less reliable). Even more surprising is that this risk aversion does not exclude distrust of women on behalf of women, as companies with more male investors are more likely to receive investments from women investors.

Someone might argue that personality traits like risk aversion do not tell the whole story. In support of this view, it has been demonstrated that the impact of gender significantly drops when the investor’s knowledge of financial markets and investments is taken into consideration. This is shocking, as it suggests that the gender disparity in the world of investments originates from knowledge disparities that trace back to education and gender-dependent encouragement to develop one’s financial expertise in early life.

Looking at the topic from another perspective, investors themselves are gendered in how they allocate their money. But do investors rely more on men because they are objectively better? Surely not. Particularly in early stages of investment, it was shown that, after investments were received, start-ups led by women outperformed those led by men. This highlights the foregone potential caused by gender bias when individuals are seeking their first opportunities – a bias that persists during further rounds of funding.

On a positive note, the world of investments is aiming to become more gender equal. Since 2009, the percentage of women partners in venture capitals nearly doubled. As many women presently lack the career experience that is required to become a professional investor, the efforts are correctly focussed on providing possibilities to younger businesswomen: this movement falls under the umbrella of “Gender Lens Investing”. Several competitions with non-repayable prize funds have been limited to women participants, to promote engagement and inclusion. Such opportunities will give women investors and entrepreneurs the possibility to be integrated into the relevant network and unleash their potential – a possibility that was initially limited due to gender discrimination.