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Last week, I came across quite an interesting article, which was based on research conducted by an investment firm called Fidelity. It found that women in this country were considerably less likely to invest than men, and were far more reserved about doing so. In fact, while more women have opened Cash ISAs than men, just 870,000 have opened a stocks and shares ISA (compared with more than a million men).
I for one have little or no understanding of stocks and shares, I have a bank account and I have a Cash ISA but that’s all and I have to say, I do not ‘shop around’ as such for our financial products. There isn’t a particular reason for this other than we haven’t ever bought a house or made a big purchase as such and so never really needed to think about what products we actually may need in the future. I have heard of P2P Lending before but never looked into it properly.
As part of the survey by Fidelity, over a third of female respondents said they didn’t feel confident about investing, while only 26 per cent of men said the same. The study also found that more women said they didn’t know enough about investing and the stock market to put money into it, compared with their male counterparts. There are many reasons or causes which may help us understand how this has come about, but, more important is to look at how the gap can be bridged.
Deterioration of savings income
Regardless of your gender, one thing we can all acknowledge is that saving has become a losing battle. The best rate of return you can get on an easy-access Cash ISA is 1.01 per cent. True, there are alternatives out there like the Santander 123 account, which will give you a return of 1.5 per cent, while there are some short-term higher interest deals available for those willing to switch bank account provider. But with inflation approaching three per cent, they are, in effect, all guaranteed to lose you money in real terms. What it means is that the need to look for alternatives to grow your money, and thus secure your family’s financial future, becomes all the more important. But, how is best to do it, and without taking on too much risk?
Peer-to-peer lending and a new type of ISA
One new means of investing which has grown in popularity in recent times is peer-to-peer lending, whereby you as a consumer lend your money to others in need of a loan via an online platform which matches you together. The idea is that, without having a big, profit-hungry middleman like a bank in between, both lender and borrower benefit from better rates, given the efficiency of the exchange (lenders can expect to earn interest of anywhere up to 6 per cent). It may sound risky, and of course there is the issue of the borrower not repaying the loan.
In that case, there is no coverage from the Financial Services Compensation Scheme, as there would be with a savings account if a bank or building society goes bust but platforms have ways of moderating this risk. For starters, only creditworthy borrowers are approved for loans in the first place, while it is also commonplace for platforms to have reserve funds to cover any arrears and defaults that may accrue.
Some have even taken it a step further by putting in place an insurance against borrower default. At the end of the day, all of these means of putting your mind at ease are in the platform’s interest; otherwise no one would invest their money with them! Also, peer-to-peer lending has become even more attractive, thanks to the introduction of a new category of ISA known as the Innovative Finance ISA. This is geared specifically towards peer-to-peer lending, and means that your returns can be shielded from tax, thus making them even more lucrative.
Is P2P the answer for tentative investors?
On the whole, it kind of positions peer-to-peer as middle ground in terms of investment versus savings. Returns are stable, but noticeably higher than savings. And while there is risk involved, it’s unlikely that you’ll experience the same level of volatility that you would with stock market investments. It isn’t a question of gender per se, but the other appealing element of going down this road is that it is incredibly simple and straightforward, and certainly doesn’t require the same level of input and maintenance that most stocks and shares do. As such, it’s an equal playing field, and, hopefully a good gateway for more women to get into investing.
As ever, putting your money into anything is a very personal decision, and one you need to be comfortable with. But hopefully this is something which will help to close the gap.