The gender gap in investing is well-established: Dating back decades, data shows that women have invested less frequently than men, and are often less confident in their investments and financial security than men are. One study shows that, on average, women hold 71% of their assets in cash, while men hold just 60%.
Alto’s 2022 Alternative Investing Report bears this out, showing that the investing gender gap has persisted beyond baby boomers and Gen X into millennials.
Overall, male investors were three times as likely as women to have high confidence that they were investing enough to retire. Among millennials, the gap remains, with 38% of millennial men feeling secure about reaching a comfortable retirement compared to 15% of millennial women.
Despite a Confidence Gap, Female Investors Often See Greater Returns
The report looks at why women are less confident in their investments (and less likely to be investing in the first place), too. The women surveyed have less wealth and fewer assets to invest than men, which can help explain the gap in confidence. Understanding the wealth gap, and knowing that there is also an investable asset gap is critical.
However, while we know the gender gap exists, it certainly doesn’t have to be that way. For as long as the investing gender gap has been around, female investors have been outperforming their male counterparts.
A decade-long study released last year found that, on average, women investors achieve positive returns and surpass men by 40 basis points, or 0.4%, annually.
What’s more, new investment options are leveling the playing field among investors, opening up asset classes to people of all financial statuses and backgrounds. Access to alternative investments and strategies that allow investors to go at their own pace can play a strong role in helping to close investing’s gender gap.
So, what, exactly, are alternative investments?
Leveling the Field
Simply put, they are investments in assets outside the traditional stocks and bonds that we’re all familiar with. The list of alternatives is wide-ranging: Some of the most common include crypto, real estate, venture capital, and even art.
Alternative investments have long been a favorite of professional investors, who invest large sums of money outside the standard stock and bond markets into real estate developments, startup companies, and more. In many cases, these investments have outperformed the stock market—consider the skyrocketing valuations of startups in recent years.
These assets aren’t just for institutional investors or the uber-wealthy, though. The past decade has seen these opportunities open up to everyday investors. Beyond leveling the playing field between Wall Street and Main Street, alternative investments can also help close investing’s gender gap.
Alternatives give anyone the ability to invest in their passions—whether that’s art, startups, or any number of other choices. Alto’s research found that 60% of millennials believe that unless you are a professional investor, it’s hard to be successful with stock market investing. Alternative investments have the potential to help ease that crisis in confidence and close the gender gap by empowering women to invest how they want.
Opening the Door to Alternatives for All
Another critical part of being able to invest with confidence is the ability to decide how you invest for your future. As a brief explanation, there is no difference between a self-directed IRA and more conventional IRAs from a tax standpoint. A self-directed Roth IRA enables you to take tax-free distributions upon eligibility the same as any Roth IRA. Similarly, assuming eligibility, a traditional IRA and a traditional self-directed IRA both enable you to defer taxes until you make withdrawals.
The difference lies in what you can invest in. With most IRAs, your options are limited to publicly traded stocks, bonds, ETFs, and mutual funds. A self-directed IRA puts you in the driver’s seat, allowing you to invest your tax-advantaged retirement funds in the assets that you’re interested in.
With increasing confidence being a key factor in closing the gender gap, self-directed IRAs present a unique opportunity to invest at your own pace and create a portfolio of investments you know and trust.
Both alternative investments and self-directed IRAs can inspire confidence through giving investors more control over both how much they’re comfortable investing and what they’re investing in. And by doing so within an IRA, investors can tap what is for most people their largest source of investable assets by rolling over a portion (or all) of an old 401(k), existing IRA, or other retirement account.
Alternatives Allow You to Invest In What You Care About
Earlier, we talked about the confidence gap and disparity in accumulated wealth between female and male investors. While alternatives certainly won’t solve all of these issues (and there’s still much more work that needs to be done), they can empower women (and men) to take control of their investable assets.
And, according to our research, though the majority of Americans distrust the stock market, many find hope in alternative investments.
Of women surveyed, 72% expressed interest in learning more about alternative investments, and a further 79% said they’d be likely to invest in alternatives if the opportunity existed.
Self-directed IRAs provide that opportunity, allowing you to choose what to invest in and how much you want to invest—whether you’re interested in fine art, commercial real estate, socially conscious startups, or cryptocurrencies like Bitcoin and Ethereum.
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