Do you want to be a statistic? A woman who avoids investing?
I didn’t think so.
There is a lot of research out there that finds women are still investing at lower rates than their male counterparts.
Women have made much headway in the financial world. Not only are we bringing more income home than ever as our participation in the labour market has continued to rise, but we also hold more wealth than ever. The Boston Consulting Group says that private wealth held by women grew from $34trn to $51trn between 2010 and 2015. Still only 30% of the all private wealth but it is expected to reach $72trn by 2020.
We have to get better at investing this wealth. We have to face and evaluate our resistance toward investing. Why do so many hesitate?
I am sure if we asked 20 people why women might avoid investing, we would get 20 answers. Some might say it’s complicated, or that women have not had to shoulder that burden historically, so women have no role models. Maybe they feel insecure, they don’t have the time, or they are afraid of the idea. It seems overwhelming.
How do we inspire ourselves to get over it?
Whenever we face something we that should do, that is good for us, but we don’t do, for whatever reason, we need to find a strategy that will motivate us to proceed.
Perhaps first, let’s inform ourselves why it is a good idea to invest.
Let’s talk numbers for a minute.
Say you have some money you are saving and you buy a bond. You might earn (yield) 2.5% on that money (estimated 10-Treasury yield). One projection for the stock market over the next decade is between 4.5-6.5%. At this rate, you could earn twice as much money or more. It is very likely that you will need this return to ensure you build enough wealth for your retirement dreams.
Yes, the stock market yields higher returns, but brings more risk, right?
There’s no doubt many women do not like the risk involved in investing in the stock market. The more risk you take gives you the potential to get higher returns.
But here’s the thing. We can manage the risk of investing in stocks.
Diversification is how we do it. To diversify you do not put all of your money into one investment. You spread your money around. Now you may not have much money if you are starting your portfolio, and you probably do not have time to research individual stocks (let’s leave that to the experts), so you can use exchange-traded funds (ETF’s) which makes diversification a snap. They are traded just like stocks, and many are commission-free with low investment costs.
So, now we know why we need to invest, and a little bit of what to buy. Let’s create a strategy.
Learn Just by reading this article you are learning some investing stuff. You will want to learn more.
Invest in What You Know Let me share an old piece of wisdom my father taught me. He was a big-time buyer of real estate, largely avoided the stock markets. If you want to invest your money yourself, stick to what you know so you can analyse it, you understand it and hopefully, you make money at it.
The Long Game When investing in the markets, you need to be in it for a long-term hold. Warren Buffet says “Our favourite holding period is forever”. You should not be seeking a get rich quick scheme, but taking a slow-and-steady wins the race approach.
Talk You are not alone in your need to invest. We all have this need. To take the fear out of investing, try talking about it. Maybe form an investment club with some friends. Perhaps with an initial mandate to learn about investing, maybe an investing book club. The more we talk about scary and unfamiliar things, the more we get comfortable.
Find Help/Ask Questions I believe that most of us should have some support when it comes to investing. New regulations have led to increased transparency in charges enabling you to compare fees for the services you seek. Giraffe is a great place to find a vetted investment advisor.
Determine the Right Asset Allocation for You Most financial professionals will verify that asset allocation is one of the most important decisions you make when investing. Asset allocation refers to how you choose to split your portfolio between stocks, bonds and cash and equivalents. If you find someone to help you with your investing, ensure you discuss asset allocation.
Most of the private wealth that changes hands in the coming decades is likely to go to women. It is essential that women lean-in to investing. Studies have shown that when we do, we often outperform men. It’s a matter of understanding our roadblocks and removing them. With time and patience, we can all ensure stability and security for our futures.