How to invest in women-led companies

TL;DR

  • Women-led can mean many things, including a female at the helm or organizing things behind the scenes.
    Businesses founded by women generate more than two times as much revenue as their male-founded counterparts according to a study done by BCG.
  • A Harvard Business Review study showed that increasing women leadership from zero to 30 percent was associated with a 15 percent increase in profitability.

In a study of over 350 startups, the Boston Consulting Group revealed that businesses founded by women deliver higher revenue—more than two times as much per dollar invested—than those founded by men, making women-owned companies better investments. This finding pairs well with Melinda Gate’s quote in 2014 that “when we invest in women, we invest in the people who invest in everyone else.”

“Women-owned businesses are growing much faster than the rest. From 2007 to 2018, women-owned businesses grew by 58% in terms of the number of firms and 46% in terms of revenue,” according to American Express research advisor Geri Stengel, “What’s driving these numbers are women of color. Women of color over that same period of time are starting businesses at a much faster rate. The number of firms owned by African-American women has grown by 164% since 2007.”

While there’s no hard and fast definition as to what qualifies a company as “women-led”, it is generally accepted that having one or more people who identify themselves as women in leadership positions, preferably at the C-suite level, counts. In 2019, women hold only 5 percent of CEO positions at S&P 500 companies. This number may not seem like enough, considering that women represent more than half of the U.S. population.

Women-led companies do not only create products and services that cater to the female population; they run across all sectors and touch every facet of your day-to-day life. Companies such as General Motors, IBM, and TheRealReal are all women-led and can be found in our Women in Charge theme.

There are about a dozen publicly-traded women-led companies, with the majority of them priced above $100 per share. As these big companies ask for a higher cost per share, many people with low investment budgets usually don’t have enough money to invest in big companies flexibly. This leads to the common perception that only the wealthiest can capitalize on long-term investing.

Fractional shares, aka slices, change all of that. Thanks to slices, investors can buy stocks without having to purchase the whole share. Now, you can invest in your dream companies with whatever dollar amount you have. For example, if a company you like is trading at $100 but you have only $20 to invest, you could now buy 20% (or 1/5) of a share of the company. Should the price of that stock rise and you decide to sell, you would earn a return in proportion to your original slice.

This is helpful if you want to buy a stock that is more expensive than what you have budgeted. Buying slices of shares in different companies can enable portfolio diversification, thus lowering your portfolio risk exposure to one single stock. In other words, instead of having all your money tied up with one share of a pricey stock, you can now buy slices of one share in multiple stocks. Buying slices of shares in different stocks can help diversify your investments, potentially reducing your risk and maximizing potential returns.

What qualifies as a women-led company?

Any publicly-traded company in the US that demonstrates “greater gender diversity within senior leadership than other firms in their sector” can earn this title. The SHE ETF  includes a roundup of these companies in an easy-to-invest-in fund. In Public’s theme, the list is limited to public companies with female CEOs in particular.

Why do people invest in women-led companies?

Women-led companies create collaborative and diverse company cultures that celebrate differences in opinions and backgrounds. Diversity in opinions and backgrounds can lead to better decision making and more areas for innovation in a company.

While supporting women-led companies is a great mission, we should still invest in companies not only because they are women-led, but also because the business prospect is appealing.

How do you find women-led companies to invest in?

You may not realize that some of the biggest companies in the world you know are led by women. It’s helpful to create a watchlist of women-led stocks and ETFs and get used to the theme. On the Public app, you can start with any stocks and ETFs that interest you, marking them as favorites without investing and keeping an eye on them as part of your daily or weekly routine.

Following news and updates from companies and ETFs you are interested in can help you stay up to date. You can learn a lot about them every day by keeping an eye on relevant market news. For all of the same reasons that a big part of being a good writer involves reading, being a great investor means researching. Learning, tracking, and staying engaged is helpful when building up your knowledge.

The bottom line

Numerous studies mentioned above show that women-led companies tend to perform better than those led by men. As women-led companies often encourage diversity of opinions, these companies could be better positioned to make business improvements and innovation, resulting in better business results. The Women in Charge theme is a great way to understand which public companies have women at the helm.

The above content is provided is paid for by Public and is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.

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