Welcome to our #73 weekly newsletter.
“For women taking control of their financial future”
-Jana Hlistova
From The Purse
In this week’s newsletter we focus on why women, who are the predominant savers, need to invest their money to avoid inflation eroding the value of their hard-earned cash.
Women hold more ISAs (individual savings accounts) than men, but tend to prefer cash ISAs to stocks & shares ISAs.
And we spotlight Cathie Wood, the Founder & CEO of ARK Investment Management, actively managed ETFs and shed some light on her investment philosophy.
She’s an evangelist who believes in the transformative power of technology.
You can review the news in brief so you stay on top of global financial, economic and investing trends.
Don’t forget to share this with a female friend or colleague-it might help to think about their money differently.
Stay safe everyone & look after yourselves.
I hope you enjoy this week’s newsletter.
Until next week,
Jana
Women: cash ISAs vs stocks & shares ISAs
Why saving and not investing puts women at financial risk
Women hold more ISAs (individual savings accounts) than men but prefer cash ISAs which offer lower rate of interest or return (compared to stocks & shares ISA).
Although this means that women are better at saving, this exposes women to more financial risk over the course of their life.
What is an ISA?
Individuals may put up to £20,000 in a tax free account, meaning no tax is due on share dividends, capital gains or interest.
As there is (relatively) no risk associated with saving in a cash ISA versus investing in the stock market (for example, via a stocks & shares ISA), the rate of return is small.
This is especially true in a low interest environment like the one we are in now. In the UK, the base interest rate is at a record low: 0.1%.
Inflation erodes your money
We are already seeing inflation rise as global economies rebound after the pandemic and governments continue to print money (swelling money supply).
Inflation in the US has jumped to an annual rate of 5% in May (the highest jump since 2008) whilst UK inflation is currently at 1.5% but likely to go up (at least in the short-term).
It is uncertain how long the central banks will let inflation rise before they step in by tightening monetary policy (for example, increase interest rates).
Therefore a lower rate of return means that women, as the predominant savers, are more vulnerable to inflation (or the rising cost of living) as it erodes the value of money overtime.
Here is an example-rate of return vs inflation:
According to analysis by The Financial Times, if women had invested their full ISA allowance each tax year (2014-2018) into a FTSE All Share tracker, it would have generated a total return of more than 25% (excluding charges).
Their total investment of £65,480 would have grown to £82,434.
In contrast, those who left their money in the average cash savings account would have grown their pot by just £290 (or a mere 0.44%).
Assuming the rate of inflation is 1.5% (UK) and the rate of return on savings is a mere 0.44%, it becomes fairly obvious not investing is a losing game.
For this reason, billionaire and hedge fund manager Ray Dalio often refers to ‘cash as trash’. And recently said in an interview, that individuals who hold assets such as property, stocks and cryptocurrencies are likely to be better off.
In fact, Ray Dalio recently went as far as to say that he’d rather buy bitcoin than a bond. (Bitcoin has gone up 200% per annum for the last 10 years).
The ISA gender gap
It is not surprising that the ‘ISA gender gap’ has doubled to £3000 over the last 10 years. And according to Sarah Coles (speaking to the FT), a personal finance analyst at Hargreaves Lansdown, this number will to go up if women do not invest their money.
What next?
Commit to investing your money
Read up on stocks & shares ISAs here
Also, check out the Lifetime ISA. You can put in up to £4,000 each year, until you’re 50. You must make your first payment before you are 40 years of age. The government will add a 25% bonus to your savings
Research online investment platforms
Connect with other women who invest and/or talk to a financial advisor.
News in Brief
Financial news
World Bank sees strongest rebound in 80 years. Global GDP will expand 5.6% this year, up from 4.1% forecast in January. This will be fuelled by fuelled largely by a 6.8% expansion in the U.S. and 8.5% in China. Developing countries will be slower to recover.
S&P 500 futures at all-time high, as investors shrug off inflation and bonds drop 3-month low. US inflation has surged 5% year-on-year in May (this is higher than the 4.7% expected).
FTSE 100 posts best week in a month. That’s its highest closing level since the end of February 2020, and near to the 15-month high set in May.
UK economy grew by 2.3% in April as the economy unlocked. However the GDP is still 3.7% smaller than in February 2020.
UK housing market is on fire, warns Bank of England (BoE) Chief Economist. the recent rise in house prices – which topped 10% over the 12 months to March 2021, according to official data – was very likely to worsen inequality.
UK women not told of pension age changes. The provisional ruling against the government opens door to potential compensation for thousands born in 1950s.
Crypto: bitcoin, ethereum & DeFi
El Salvador makes bitcoin legal tender. This is the first country in the world to do this. The President, Nayib Bukele said in a tweet: ‘It will bring financial inclusion, investment, tourism, innovation and economic development for our country’.
Bitcoin slumped to a two-week low (on Tuesday) to $31,036, with analysts pointing to technical issues and the recovery of Colonial Pipeline Co.’s ransom as evidence that crypto isn’t beyond government control. The bitcoin price (today) is approximately $36,000.
State Street launches digital finance unit for crypto. State Street Digital will focus on expanding its capabilities to include crypto, central bank digital currency, blockchain, and tokenisation.
Alan Howard leads $25m investment in crypto custodian Copper. The additional funding will be used to support traditional financial institutions adopt crypto and distributed ledger technology (DLT).
(US) Coinbase partners with ForUsAll, a retirement investment platform for small businesses, to bring crypto to 401(K).
Cathie Wood and the transformative power of technology
Actively managed ETFs & Cathie Wood’s investment philosophy
Cathie Wood, the Founder & CEO of ARK Investment Management (US) has become a bit of a rockstar investor, as per Bloomberg.
Referred to as the first star in the ETF (exchange traded fund) industry valued at $6.3 trillion, Cathie’s company is made up of 8 funds, 6 of which are actively managed ETFs (a relatively new approach when she launched).
Investors have injected $34bn into ARK’s 8 funds (in the past 12 months) and withdrawn (only) $1.2bn since February, despite the ARK Innovation Fund (main fund) losing all its 2021 gains.
However the main fund is still up approximately 220% (despite the recent selloff).
What is an exchange traded fund (ETF)?
An ETF is a basket of companies which matches the market or index benchmark eg the S&P 500 or FTSE 100. It can track an index, sector, commodity, or other asset and can be purchased or sold on a stock exchange the same as a share.
ETFs can be passive or actively managed.
Their flexible, tax-efficient structure allows anyone to buy in and they are usually fully transparent and based on a set list of investments.
ARK’s main fund is the ARK Innovation ETF which focuses on ‘disruptive innovation’, businesses with technologies that could change how the world works.
The company’s funds are focused on technologies which are bringing about a profound transformation of the economy.
These cover five technologies—artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
For example, their Genomics Revolution ETF covers companies involved in Crispr, gene editing, therapeutics, agricultural biology, and health-care innovation.
The Fintech Innovation ETF focuses on mobile payments, digital wallets, blockchain technology, and other fintech advances.
And they even have a Space Exploration & Innovation ETF which focuses on enterprises that help enable space exploration, as well as those that benefit from aerospace activities.
Cathie Wood’s investment philosophy
Cathie evangelises how transformative technology will be in changing the way the world works.
In the depths of the pandemic, she talked about how technology will change everything.
Despite the market turning recently (for example technology stocks are down), Cathie’s focus is on the long-term; she likes to emphasise a 5 year time horizon for ARK investments.
She regards a ‘crisis’ like a pandemic or the financial crisis in 2008, as ‘an opportunity for innovation to take root and gain traction’.
The other reason Cathie is optimistic, is that she says: ‘lower stock prices now mean even bigger returns later for companies like Tesla with ie ‘exponential growth opportunities’.
Cathie on Bitcoin
Despite Bitcoin dropping in price from its all-time high at $65,000 in April to (currently) at approximately $36,000, Cathie is very bullish regarding the future and price of the world’s largest cryptocurrency.
Her prediction that her favourite cryptocurrency will get to $500,000-still stands.
Here’s more info
Read the definition of an actively managed ETF
Cathie Wood: why bitcoin can not be shut down and rebuts ESG concerns
Coffee Break? Read This
Feeling emotionally exhausted? 6 things you can do to release your stress
Female entrepreneurs are being held back by old-fashioned ideas of who can start a company.
We’d love to hear from you. Get in touch with Jana via the The Purse website or tweet @jointhepurse and @janicka.
The Purse Ltd. Copyright 2021 & All Rights Reserved.
The Purse provides content for informational purposes only, we do not provide product recommendations or investment advice. Please do your own research or speak to a financial advisor.
Share this post