Women are a third more likely to want portfolios that reflect their values, but is this a good investment strategy?
A female trader at the New York Stock Exchange. More women are using a “gender lens” when selecting stocks.
Every investor, from the novice to the billionaire, expects a positive financial return. A growing number of them, however, are going further, asking what kind of companies they are supporting with their capital. “Women are a third more likely to say they want their portfolios to reflect their values,” says Jackie Vander-Brug, senior vice president and valuesbased investment strategist with US Trust, a division of Bank of America. They’re also more likely, according to a US Trust survey of high-net-worth adults, to accept a greater degree of risk, or a lower return, if it means that their investments reflect their values.
There are a few different ways to put your money where your values are. Pros suggest, for example, investing in one of the growing number of socially responsible mutual funds. Some of these funds emphasize a particular cause, either actively seeking out companies that have, say, top-tier environmental track records or that can boast progressive employment policies. Some of these investors want to go further still and make sure their capital supports causes that are important to women. That could include investing in businesses that have women more equitably represented as directors and executives; or putting money to work in microfinance funds aimed at women in the world’s poorest nations.
For its part, US Trust has launched a proprietary initiative, dubbed Women and Girls Equality Strategy, that uses a number of traditional investment criteria to identify publicly-traded investment opportunities—stocks and bonds—that are not only attractive in absolute terms, but that have a strong track record on everything from hiring women to how females are portrayed in marketing. Women with the right kind of expertise are also gravitating to angel investing networks, such as Golden Seeds, that specialize in providing capital to women entrepreneurs.
Opting to view your investments through such a “gender lens” can be transformational—especially for women who have left financial decisions to their spouses. There’s one caveat, however. Although there is research showing a correlation between a company’s strong investment performance and women-friendly policies and products, it’s still tough to argue the latter are the cause of that outperformance. Simply because there are more women on a company’s board doesn’t mean that it’s going to be more progressive or more fiscally responsible. Financial advisor Alice Finn, founder of PowerHouse Assets, also notes it’s important for anyone who makes changes to their portfolio after viewing it through a gender lens to make sure they haven’t unintentionally made it less diversified or more risky. “The process [of using a gender lens] can make a woman feel more confident that she’s doing the right thing with her money, but she needs to be sure, too, that the products she invests in are those that will do the best for her in generating returns” that will enable her to maintain her financial independence, says Finn.