As trading apps such as Britain’s Freetrade and Robinhood in the United States pledge to “democratise” investing, millions of non-traditional investors – including women and young people – have jumped into equities markets for the first time.
The pandemic has helped – giving novice investors more time to read up and trade online. With women faring worse in terms of lost jobs and income due to Covid-19, they have had an added incentive to address their finances, industry experts said.
Building confidence in their investment decisions will be key, however, with a recent survey by Freetrade showing only 7 per cent of women said they felt confident before making an investment.
And as such platforms drive the ‘meme stock’ phenomenon, in which certain stocks tipped on social media have surged in value and drawn warnings from regulators, could some first-time female investors take a step back?
How are trading apps creating new female investors?
Downloads of Robinhood’s app reached 2.1 million in February, up 55 per cent from a year ago, according to an analysis by investment bank JMP Securities LLC. Other such sites have reported similar increases in downloads during the pandemic.
Women are still a minority of users, but the number of new female investors appears in some cases to be growing faster than for men.
Retail trading platform eToro reported a 366 per cent rise in the number of new women investors since the beginning of the year, compared with a 248 per cent increase for men.
As well as being younger, share trading newcomers are more often female, according to research published in March by Britain’s Financial Conduct Authority (FCA) regulatory body.
It is a welcome trend, said Susannah Streeter, senior investment and markets analyst at British investment firm Hargreaves Lansdown, though she cautioned about the dangers of using social media advice to guide investment decisions – as has been the case with meme stocks.
“The risk is that they could get their fingers seriously burnt by following the herd into highly risky purchases, which could scare them off investing in the future,” she said.
While there’s a silver lining – with 38.9 per cent saying they felt excited before starting to invest- it shows there’s still lots to do to build confidence in women’s investment journeys.
How has the pandemic fueled trading by women?
While home working and lockdown measures have given many people more time to weigh up their finances and do online research and trading, women may have had additional incentives to make the leap into retail investment apps.
A UN report released in September 2020 showed women were bearing a disproportionate share of the economic pain caused by Covid-19, warning that they could also experience long-term setbacks in work force participation, pensions and savings.
The survey by Freetrade showed 45 per cent of women said the reason they started investing was to gain peace of mind in knowing they were building their savings.
“It seems that, if anything, any additional time that lockdown may have provided led women to start investing because they had read elsewhere about the importance of starting early (33.6 per cent reported this as a key factor),” a Freetrade spokeswoman said.
What about the ‘meme stocks’ trend?
Retail investors using trading platforms, and social media investment advice, have been behind a surge in the value of certain company shares – known as meme stocks.
They include cinema operator AMC Entertainment Holdings Inc and video game retailer GameStop, whose shares soared in January in a retail-driven rally.
The sharp gains and volatility of such stocks have drawn warnings from regulators and analysts, which could deter women.
The vast majority of meme stock investors are male, Streeter said, adding that women tended to be more risk aware when it comes to speculative investing.
“Hargreaves’ stats show that for stocks like GameStop and AMC Entertainment, which were among the most popular on the platform last week, in 2021, roughly 86 per cent of the trades have been carried out by men,” she said.
“There was a spike (of women) last October interestingly, but it appears to show that overall, women have a risk averse attitude compared to men, when it comes to speculative investing.”
What next for new female investors?
With meme stocks “well and truly out of the social media bag”, Streeter urged investment newcomers to use free research available on regulated investment platforms rather than taking advice from influencers on TikTok, Instagram or Twitter.
Access to trustworthy investment information could be particularly important for women, experts said.
“Using available research may improve investment confidence, which Freetrade notes is ‘quite low for women before they started’,” the Freetrade spokeswoman said by email.
A survey by the company found that only 7 per cent of women said they felt confident before investing, with 43 per cent saying they felt nervous, and 34 per cent confused.
“While there’s a silver lining – with 38.9 per cent saying they felt excited before starting to invest- it shows there’s still lots to do to build confidence in women’s investment journeys.”
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