As the famous saying goes, money makes the world go round — and men, on average, have more of it than women.

This is partly due to pay and pensions, but there is also another point of disparity: the stock market.  

Just 25 per cent of women across all age groups invest, compared to 37 per cent of men. And as investing your money rather than sticking it in a savings account should be better for your long-term finances, this has a knock-on effect on the financial stability of women. 

Why this is a problem

When we look at someone’s total savings and investments — so their cash, pensions and investments, but not their house — the average woman has £49,000. This seems like a decent sum, until we compare it to men’s average total of £114,000. Across the UK, that’s a gap of £1.65 trillion, according to AJ Bell’s Money Matters research.  

“Women are great at saving but appear to be more hesitant when it comes to investing,” said Laura Suter from the investment company AJ Bell. “There are far more male investors than female investors. This becomes a problem, because investing your money has the potential to boost your financial resilience.” 

Even after stock market crashes, which can spook the most experienced of investors, history shows that the market tends to rally. Just five years after the global financial crisis in 2008, the UK stock market was up 30 per cent on where it had been before. 

“Of course, investing comes with more risk,” said Susannah Streeter from Hargreaves Lansdown, an investment platform. “But over the long-term, investing in the stock market has typically produced higher returns compared to cash savings. 

“You might think saving is low risk, but over the long-term, there’s a real risk of the value of your savings not keeping up with inflation.” 

How to get involved

First things first, make sure you are in a position to invest.  

Before you think about the stock market, pay down any pricey debt. Otherwise, the interest you rack up on your credit card or overdraft will more than wipe out the gains you make investing.  

It’s also worth building up some “rainy day” savings in cash that you can access quickly and easily for emergencies. Generally, it’s a good idea to have around three months of outgoings (think your housing costs, bills and essential spending) as a savings buffer and only invest money that you don’t plan to spend for at least five years.

Once you’re ready to invest, you need to think about “tax wrappers” — a fancy way of saying that the investments held within these “wrappers” are free from tax. You have two main options: an Isa or a pension, but an Isa is ideal for money that you want to access before retirement. 

Investing in a stocks and shares Isa means that you do not pay any capital gains tax on any profits you make or dividend tax on any dividends paid from the companies you are invested in. You can pay in up to £20,000 a year, and can access the money whenever you wish (although there will be a lag if you need to sell investments). 

In reality, companies can have billions of shares, but the process works the same way.  

A fund is effectively a basket of companies. You buy a “unit” in a fund, and the fund manager will invest the collective money put into the fund into different companies. This is an easy way of splitting your money between a number of investments.  

If the fund does well, the units of the fund that you own become more valuable, and you will get more money back when you take it out. If the fund does poorly, the opposite is true. 

An investment trust works similarly to a fund but instead of buying “units”, you buy shares of the investment trust. The investment trust then invests in other companies, and the share price of the investment trust goes up and down depending on how well the trust’s investments do. You trade the shares of the investment trust on the stock market the same way you would a normal company. 

The main mantra to follow is to avoid putting all your eggs in one basket. It is typically good to spread your investments across different countries and types of investments as it lowers the risk of your entire portfolio crashing at once. 

One easy, and cheap, way to do this is to look at a global tracker fund. Tracker funds effectively mimic the returns of the stock market, so a global tracker fund will mimic global returns. To invest in a tracker fund, you would put your money into one of these funds via your investment platform – and then leave it. The value of your money would then go up if the value of the stock markets that the tracker fund had exposure to went up, and vice versa. 

You could look at the Fidelity Index World fund or Vanguard’s 100% LifeStrategy fund if you wanted to go down this route. 

If you want to invest in bonds and commodities (for example, gold and oil) as well as the stock market, you should look at multi-asset funds. These funds are usually a little more expensive, but provide you with a ready-made portfolio which covers a range of investment types.  

In general, the longer you plan to keep your money invested, the more “risk” you can afford to take. The stock market is typically more volatile than the bond market but tends to produce higher returns over the long-term.  

Bonds are effectively IOUs that investors give to governments or companies in return for interest. At the end of the agreed upon term, you get your money back (and have received interest during this time as well). Most bonds, especially government bonds, are considered less risky than the stock market because the risk of not getting your money back is lower. 

So, if you have decades before you want to use your money, you could consider investing solely in the stock market. If you want to use the money for a house deposit in eight years’ time, you may want a multi-asset fund instead. 

“Finding the right level of diversification depends on your circumstances and what you are investing for,” said Streeter.  

“But the real secret to investing is when you start. Time is the most powerful ingredient to long-term returns — it takes endurance and patience.” 

Disclaimer

AllBright cannot guarantee that all of the information provided in this video or article is accurate. Use the information provided on our website at your own risk. If you wish to make an investment you should seek independent financial advice before doing so, and ensure that you have carried out your own research on the product or company that you are investing in. Any advice provided is not tailored to anyone’s individual situation, as each individual is in a different situation. AllBright does not accept any liability whatsoever for any action taken or losses incurred as a result of the information provided on our site.