It’s 2016, and women have made great strides in many directions. They control trillions in global spending and wealth, the wage gap is closing (albeit slowly), and women tend to live longer than men, creating an even greater need for strong retirement and investment portfolios.
Remarkably, women even outperform men in their investments — when they invest, that is. Traditional equity market investing data indicates virtually no difference between men’s and women’s participation rates. If you look only at standard investment products, such as 401(k) accounts, stocks, ETFs, and retirement plans, the participation rates of the sexes appear to be equal. However, alternative investing tells a different story.
Alternative investment platforms have mushroomed in the past few years, offering unprecedented access to investments in real estate, small business loans, commercial loans, and consumer loans that were previously unavailable to 99.5 percent of investors, according to our data. Its crowdfunded, peer-to-peer nature allows most investors to invest small amounts, yet participate in institutional-grade investments.
So I was surprised to find, when my team analyzed our user data, that our investor base was 90 percent male. This didn’t make sense to us. Alternative platforms also provide ways to make socially conscious investments, which we know matter deeply to women. In a 2015 survey, 95 percent of women said that helping others through their investing is important to them, and 90 percent prioritized environmental responsibility.
Women and Alternative Investing: A Perfect Fit?
Although online platforms focused on alternative investing are a relatively new phenomenon, they offer women, in particular, opportunities that align with their values and preferences.
As pointed out by Financial Times, some women prefer to invest conservatively, and they’re more likely to keep their money in a savings account than risk the volatility of the stock market. Of course, all investing carries risks; however, women might find alternative investing a more secure option. Rather than risk lost value due to stock market volatility, the risks involved with alternative investments often lie in liquidity and convenience.
Liquidity depends on the types of assets you hold and the market conditions that influence their values. U.S. Treasury bonds, for instance, are highly liquid because it’s easy to find buyers at fair market prices. On the other hand, real estate holdings are subject to local market conditions and lending trends, meaning investors may not be able to sell as quickly as they’d like — which, for some folks, may still be a more reassuring position than playing the market.
Alternative investing should also appeal to those who prefer stable investments, and women tend to mix or re-balance their portfolios less frequently than men do. There is no re-balancing or trading involved in alternatives, as they’re often set for a fixed duration, making them a more predictable option.
Moreover, many alternative investments are able to make a local or community impact as they create jobs or economic activity. They often offer fixed income, making them even more attractive. The risks are made clear upfront, and if an investment’s duration is about three years or less, those risk factors are unlikely to change.
Can This Fit Create a Movement?
Although participation rates are similar in products like 401(k)s for men and women, women make less and tend to contribute less to their 401(k)s overall, resulting in smaller nest eggs at retirement. This makes consideration of higher-yield products like alternative investments even more important.
Women investors are important to the financial ecosystem, and alternative platforms are a great way to bring them into it. If all the characteristics women want in their investments match the defining attributes of alternatives, what can companies do better?
Fintech-led alternative platforms should emphasize the character of their investments. Opportunities to create jobs or have a positive social impact are particularly attractive to Millennial women. Not only do such investments make an economic impact on the community, but they also increase the amount of capital available to entrepreneurs who don’t fit into traditional bank underwriting.
However, women’s influence can extend well beyond boosting capital, participation, and diversity. Their voices balance the decision-making process among financial advisors, and their views are integral to the conversation among stakeholders, including their spouses and significant others.
More women need to become investors — when more women participate, everyone benefits. As women continue to build their wealth and economic power, they will become increasingly influential, providing powerful voices on boards, within companies, and in the financial world as a whole. And they will, of course, empower their families to travel a path to financial independence.
As alternative platforms mature and bring more women into the fold, they’ll provide critical gateways to accessing capital and expanding investing power across gender lines.
Milind Mehere is a passionate serial entrepreneur currently at the helm of YieldStreet as CEO and founder. YieldStreet uses technology, data, and investment management to empower financial independence for all. Milind has been fortunate to work for industry-defining companies, and he has successfully built and scaled three businesses, one of which, Yodle, was acquired by Web.com for $342 million in 2016.