When it comes to investing, relying on what the people around you are doing can be a very big mistake.
And, according to Schroders, women aged 18-34 are the group most likely to do so.
In the investment manager’s investIQ report, it found that younger women are 14% more likely than average to follow the “herd” and not invest in solutions that might be more suitable for them individually, or even not invest at all.
The study looked at a sample size of 23,000 Brits to assess any behavioural biases people tend to have when making investment decisions.
Gender imbalance
When it comes to a “herd bias”, women in the 18-34 age bracket are 14% more likely to succumb to this mentality than men (4%).
But the gap closes as people get older.
Women aged 35-49 are 5% more likely to show this type of behaviour, compared to men (2%).
From the age of 50, however, the herd mentality dissipates and both genders are less likely to mimic their peers.
One anomaly in the age ranges, however, is the 50-65 cohort, where women were less likely than men to follow the herd.
Compared with the average, men were 4% less likely to be influenced by others, while women were 7% less likely.
The situation reverts for those aged 65+, where men and women were 11% and 10% less likely to follow the pack, respectively.
Break the cycle
“Herd bias can be responsible for driving classic investment mistakes – such as, buying high and selling low or chasing potential investment bubbles like bitcoin – it may also be driving how women do (or do not) engage with their finances,” said Claire Walsh, personal finance director at Schroders.
“Most young women don’t invest, so if they are talking to friends, they are likely to reinforce that behaviour. The result being that they may be more likely to keep their money in cash.
“Over the longer term, not investing – in thing like stocks and shares – may mean that women are missing out. Particularly when it comes to their pension, this can have a big impact.
“Research from the Pension Policy Institute (PPI) found women in their 60s have an average of £51,100 in their private pension pots while men have £156,500 ($191,087, € 171,618).”
Not one cause
In addition to the above, Schroders also identified two other behavioural traits that are negatively impacting how women invest.
They are also more likely to be anxious about their investments, resulting in them being easily influenced by short-term market fluctuations.
Additionally, faring that their investment decisions could turn out to be wrong is a bigger worry for women than it is for men, causing them to be less risky or to not invest at all.
