00:00
Faye Witherall
Hi everyone. Welcome to episode four of iShares Investor Insights. I'm your host, Faye Witherall, and I'm pleased to welcome Gargi Chaudhuri, head of investment strategy and markets coverage here at iShares. Gargi is a regular guest on news outlets like Bloomberg Surveillance and Yahoo! Finance and she happens to be my boss, so wish me luck. Gargi, welcome.
00:21
Gargi Chaudhuri
Faye, it's so wonderful to be here. Thank you for doing this and thank you for having me.
00:25
Faye Witherall
So excited to have you, Gargi. So, so far in the series, we've covered the basics of investing, the power of ETFs, iShares' commitment to empower investor choice. And for this episode, Gargi, we're hoping that you can share some thoughts about how people can actually implement the ideas and the concepts that we've discussed. In honor of Women's History Month, let's frame this discussion around the outlook for women investors.
00:49
Faye Witherall
If that works for you.
00:50
Gargi Chaudhuri
Yeah, that would be great.
00:52
Faye Witherall
Perfect. Okay, let's start with the wealth gap. Women make about $0.82 on the dollar when compared to men.1 Let's set aside the moral implications of that. But what does this mean for investing? You know, is that really even going to make a big difference over the course of my, you know, hopefully long career?
01:09
Gargi Chaudhuri
Yeah, great start and a really good point in terms of understanding the consequences of pay gap. So, as you pointed out, it's about $0.82 on the dollar. And while, you know, we can get into a further another debate around what that means, I think the more important implication, from a financial standpoint, is what it can mean for women in terms of the harm it can do to their investing career, to their financial careers, and not just for them, but their dependents.
And in addition to the pay gap which you referred to, I think there's a few other things that we also have to take into consideration that impact women particularly. So women tend to live longer than men, which of course is a good thing. But you would need to have your money with you and you need to have your money work for you for a longer period of time.
We also need to consider that many women tend to take some time away from markets to look after loved ones, and that's also when they don't get to participate either in their firm's 401ks or they don't get to participate in compensation growth. And again, that is something that impacts their financial well-being and financial wellness as well.
And I think the other thing and hopefully we spend a lot more time talking about this is thinking about compound interest, right? So, the more you earn, the more you save and the more you invest, and I want to sort of underline that, if I could, the better you do.
02:44
Faye Witherall
Thanks, Gargi, I don't want to put you on the spot with any math, but I do have some numbers in front of me that kind of illustrates that point you were talking about. You know, we can look at a saver versus an investor, and if you're just putting away $5,000 a year, that saver at the end of 40 years will have $200,000.
And, you know, that's a heck of a lot better than not saving. But any interest earned on that saving is unlikely to keep up with inflation. And the investor, on the other hand, that is the exact same thing about investing that $5,000 over the course of 40 years will actually have around $868,000 at the end of that period.2
So you can really see that monumental kind of gap there.
03:27
Gargi Chaudhuri
Absolutely. And that $868,000 that you laid out is just assuming, you know, what has happened historically. And markets are very in a, you know, a 7% annual return, which has very much been in line with historical averages, which doesn't take into effect other things that can happen, you know, GDP, things like that, you know, make your investment returns do a certain way and the other.
I'd also say that one of the things that we have to remember as we think about why it's so important for everyone to invest, but certainly those that are already sort of starting off at a little bit of a disadvantage from that wealth gap standpoint, I think recognizing that one of the ways that you can own your financial future is actually with investing and starting small, starting diversified, but starting investing today, even doing it one year earlier or five years earlier makes a lot of difference versus, you know, putting it off for a for a future period.
04:30
Faye Witherall
I want to jump in there. I had recently caught you on an episode of The Bid, which is BlackRock's podcast as well. You were with Anne Ackerley the head of our retirement group. I think something that you highlighted that was really interesting was that women tend to be more conservative than men in their investments.3
04:47
Gargi Chaudhuri
Yeah, so we've done a lot of work around this and sort of looked at a lot of surveys that have gone out that look at, you know, how men and women tend to invest differently. And again, there is some good news here, right. And we'll start with the good news first, which is that more and more younger women, and I'd love to pick your brain on that.
More and more younger women are investing today compared to a few years ago, and they are opening up more accounts and investing outside of retirement, which is fantastic.4
I mean, I tend to look at intersectional data as well, given that I am a woman of color. And we again find some of the studies that showed that women, Black women, Hispanic and Latina women are more knowledgeable today than they were five years ago around their investing knowledge, which again is something to celebrate.5
However, there was this Fidelity study that was done that showed only about a third of the women see themselves as investors.6 Women tend to have more that they pile up in cash. And, you know, women, I think, you know, tend to hold themselves back for a variety of different reasons that we can get into. But being more conservative, holding more cash, not having the same sort of portfolio that you could otherwise have in a diversified manner over a period of time has a drag on your portfolios.
So if you even hold, you know, five or 10% cash versus being fully invested over the course of 10, 15, 20 years, that adds up meaningfully and you've lost out on all those returns from a diversified portfolio.7
06:32
Faye Witherall
You know, it's really interesting you bring this up, Gargi because I just came back from a weekend trip with my college roommates and of the five of us, where I'm the only one who invests outside of my 401k.
06:42
Gargi Chaudhuri
We are very proud of you. Yay!
06:46
Faye Witherall
But yeah, everyone else is saying they, you know, keep the rest of their money in a savings account just in cash.
That anecdotal information is great, and that's not too far away from what we see in some of the data as well, that, you know, women tend to shy away from investing.8 And yes, the numbers are increasing. So you are the representation of the number that is increasing. But I think, you know, when I think about the reasons that might be holding some of your friends back and hopefully after this conversation with you, they're all going to go and invest and do really well over the next 10, 20, 30 years.
But when I think about some of the reasons that may hold back women from investing, I think, you know, part of it can be the lack of representation. You don't see people that look like you that are investing, whether that's, you know, when you're watching TV and who's reading financial news or when you are looking at who manages money.
You know, I looked at the number for the Certified Financial Planner board, which is obviously the financial advisors of the about 100,000 in total, only about 24% are women.9 So there is that lack of representation, lack of women money managers. We've looked at some data around models and, you know, we've tended to find that the number of women that are portfolio managers is stuck between that 12% to 20% range.10
So I think there's a variety of reasons, which is why us having this conversation, us spreading awareness. You having that conversation on your trip with friends is so important. Spreading the news that when you're not investing, you are not taking control of your financial future. It's the one way in which we can, you know, it's a feminist thing to do for everyone.
And when we're leaving money on the sidelines, when we're leaving money in cash, we're really missing out. And it is for everyone. Historically, we might not have felt as represented, but today we recognize that investing is for everyone. And there's very easy ways to do that. And you don't need a lot of money to start on your investing journey.
08:49
Faye Witherall
Okay, you got me. I'm sold. So how then do we implement this? What tips do you have for women or anyone who want to start that investing journey?
08:59
Gargi Chaudhuri
Yes, absolutely. So I think, you know, first of all, the one place that everyone thinks about is really around retirement. So let's speak about that first, because we are all thinking about what we're going to do, how many marathons are going to run when we are retired, and that needs money. So one of the ways in which we can think about that and something that we're so proud of where we've innovated is iShares Lifepath Target Date ETFs, really easy way to navigate your retirement planning.
You know, you sort of select a fund that's closest to your target date of retirement. When do you plan to retire, and you choose that fund and the LifePath investment team will change the mix of stocks and bonds to reduce your exposure as that date slowly comes closer. So it's automated so you don't have to worry about getting in there and having to readjust or spend the time or wonder what you need to do.
You don't have to worry about that yourself. So that's one that immediately comes to mind, especially for those that are thinking about retirement, which is hopefully everyone.
But also away from retirement. When we think about other options, you know, we have the iShares core allocation funds. These are low-cost ETFs and it's a one stop solution, it's a really simple way to get you that diversification that we talked about earlier, which is a good way to just get started or stay invested.
So, the one that we can talk about is the core growth allocation ETF. The AOR ticker holds about 6,000 stocks and 14,000 bonds. And if you have a growth mindset, so let's say, you know, retirement is pretty far away for you. And this is one way. It comes in variety of flavors and, you know, conservative, moderate, aggressive11 -- but sort of thinking about what your risk tolerance is, AOR is a good one
where, you know, if you have that growth mindset or a little bit of tolerance for risk.
The big difference between whether you have a conservative, moderate or aggressive mindset is really around how much of the fund is invested in stocks versus bonds. So again, these are ways in which you can get started. It's easy, it's convenient. And most importantly, the myth that I want to bust is that you don't need a lot to get started.
You can do this tomorrow. Today would have been better, yesterday the best.
11:22
Faye Witherall
I love that. I think this is a really good opportunity. And you mentioned that this sort of automatically takes care of those adjustments or rebalances as you approach your retirement date. So I think that's a really awesome solution, and I will be plugging it in my college group chat.
So thank you. Gargi. You know, before we part, I wonder if you have any final tips or investment advice for women before we wrap up.
11:51
Gargi Chaudhuri
Yeah, sure. I think the one thing that we can all do is what you already did on your college friends' trip, which is encourage conversations about investing. You know, we are privileged that we work in the asset management industry, Faye for you and I, this is every day we talk about this stuff every day. But it's not for everyone or it's not everyone's cup of tea every day, but it's on us to have those transparent, open conversations about what does investing look like, why you need to do it.
The numbers that you talked about earlier around how much you lose out on over the course of four decades if you're staying in cash versus if you're investing it in a diversified portfolio. So having those conversations is something that we can all do -- transparency and honesty about things like, you know, debt, compensation growth, pay, wealth gaps. I think that's something, again, which is incumbent on all of us to do and have those conversations often and honestly.
12:55
Faye Witherall
Okay, Thank you, Gargi. This has been a really fun conversation. I really appreciate you joining us.
00;13;01;10 - 00;13;02;28
12:56
Gargi Chaudhuri
Thank you for having me Faye.
13:05
Faye Witherall
Thanks, everyone, for listening. Please check out our other episodes and if you know someone who might enjoy or benefit from this series, please share it with them. You can always explore ishares.com for additional insights and education about our entire suite of ETFs. And if you haven't already, we encourage you to sign up for our newsletter and subscribe to our social channels for exclusive, timely, and digestible insights. I'm Faye Witherall and please remember that investing is a journey. The more informed you are, the better decisions you make.
1 Source: Bureau of Labor Statistics, Bloomberg. Wages as represented by US Average Weekly Earnings All Employees Total Private SA US Average Weekly Wages All Employees Total Private SA. As of February 24, 2024.
2 Source: BlackRock. Hypothetical example assuming a 7% return over 40 years, with an annual contribution of $5,000 per year. 7% is the weighted average annual return of a hypothetical portfolio composed of 60% weight to the S&P 500 Index and a 40% weight to the Bloomberg US Aggregate Bond Index for the 20-year time period ending 9/30/2023.
3 Source: Fidelity Investments, '2021 Women and Investing Study.' As of December 31, 2021.
4 Source: Fidelity Investments, '2021 Women and Investing Study.' As of December 31, 2021.
5 Source: JP Morgan as of September 2023: Black, Hispanic and Latina Women Report Increased Confidence in Investing Knowledge and Build Generational Wealth, Finds New J.P. Morgan Wealth Management Study (jpmorganchase.com)
6 Source: Fidelity Investments, '2021 Women and Investing Study.' As of December 31, 2021.
7 Source: Bloomberg, BlackRock. Cash as represented by Bloomberg US Treasury Bill 1-3M, returns as represented by SPX Total Return Index. On average over past 10, 15, 20-year timeframe (from December 2023), SPX Index outperformed Bloomberg US Treasury Bill 1-3M on both a total return and price return basis.
8 Source: Wells Fargo Investment Institute, 'Women and Investing,' as of November 30, 2023.
9 Source: CFA Institute Research Foundation.
10 BlackRock, Morningstar. Dataset as represented by 1665 moderate models (as classified by Morningstar) that tracked against a benchmark in 2023, and 1286 moderate models that tracked against a benchmark over the past 3 years. Number of women that are PMs as represented by teams that include at least one female on portfolio management team. As of Dec. 31, 2023
11 Source: Asset Allocation Solutions (ishares.com)
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