Investment platform Ellevest reports that 71% of assets controlled by women are in cash, not invested. This statistic highlights the fact that women are less likely to invest and, when they do, tend to wait until later in life to begin. Many women believe that they need to be experts in the industry in order to succeed at investing, leading them to hold off until they feel more financially secure. However, there are numerous tools and resources available to help people, including women, get started with investing even small amounts of money. A study by Merrill Lynch found that 41% of women wish they had invested more of their money.
1. Best Financial Equality plans for Women
Investing can help women to achieve financial equality and independence. The gender pay gap and the pink tax can make it more difficult for women to accumulate wealth, but investing can provide them with the means to do so. By investing, women can ensure that they have the potential to accumulate the same amount of wealth as men. This can be particularly important for women who may want to leave situations that are not serving them, such as a bad job or a bad relationship. Having their own financial power can give them the confidence and ability to make decisions that enable them to care for themselves and be independent. Ellevest’s Susan Thompson highlights the importance of this, noting that it is important for women to be able to walk away from situations that are hurting or not serving them. Investing can help to give them this power and provide them with the means to achieve financial independence.
2. Reaching Financial Goals
Investing is a powerful tool for reaching a variety of financial goals, including going back to school, building an emergency fund, sending children to college, saving for a major expense like a house or wedding, and growing overall wealth. It is often considered the best way to achieve these goals due to its potential for compound interest and diversification, which can help to minimize risk and maximize returns. By investing, you can work towards your financial goals and build a more secure financial future for yourself and your loved ones.
3. Best Saving plan for Retirement
On average, women earn about 83 cents for every dollar earned by men. This means that even if women are saving the same percentage of their income as men, they will not be able to save the same amount due to the gender pay gap. Additionally, women tend to live longer than men, which means that they need their savings to last longer in retirement. Investing can be a powerful tool for helping women to grow their savings and make them last longer in retirement. Many employers offer 401(k) or similar retirement savings plans that include a matching contribution. If you are unsure about whether investing is right for you, consider enrolling in your employer’s program and watch as your savings grow. This can be a low-risk way to get started with investing and see the potential benefits firsthand.
4. Saving Account Alone is not Enough for Women
Cash that is not invested can actually lose value over time due to inflation. This means that if you are not actively growing your savings, you could be losing money. A solid investment strategy can help you to grow your savings significantly over the long term, as shown in the chart below. However, men are five times more likely to name investing as their top financial goal, which means that more men are able to achieve these exponential returns throughout their lifetimes than women. By investing, women can earn more money than they would through a savings account alone, even with small monthly deposits. This can be a powerful way for women to grow their wealth and achieve financial security.
Invest Like a Women
Contrary to popular belief, women often possess traits that give them an advantage in the investment market. According to an article from Kiplinger, studies show that men tend to approach investing like baseball players swinging for home runs, even if it means taking more risks and potentially striking out more often. Women, on the other hand, are more like contact hitters, satisfied with a series of singles. This means that women are less likely to experience large swings in their portfolio values, leading to steadier growth over time. Additionally, studies have found that women are less likely to trade investments, which leads to almost a 1% higher increase in investment earnings per year compared to men, who trade 45% more frequently. Women are also more likely to be long-term planners, focusing on specific growth goals rather than chasing risky returns, and are more likely to seek out financial advice from experts in the industry. This willingness to ask for help gives them more opportunities to grow their wealth. Overall, these traits can give women an advantage in the investment market and help them to achieve their financial goals.
Figure Out Budget Allocation
Financial experts often recommend following a 50/30/20 budget allocation philosophy, where 50% of your income goes towards needs like food, housing, and utilities, 30% is dedicated to self-care and leisure activities, and 20% is saved or invested. Deciding how much to invest versus set aside in a short-term savings account depends on your risk tolerance. The market has generally been rising in recent years, but returns are never guaranteed. It is important to only invest what you are willing to lose, especially if you are considering aggressive or volatile markets. To make investing a regular part of your financial routine, consider setting up automatic withdrawals each month, even if it is just a small amount. As Susan Thompson from Ellevest suggests, “make a habit of putting money back towards your future, even if it’s a small amount.” This can help you to build a strong foundation for your financial future.
Know the Basics of Investing
It is not necessary to be a stock market expert, but having a basic understanding of different types of assets can help you to communicate your financial goals and understand what is happening with your money. Some common types of assets that you can invest in include stocks, which represent ownership in a company and tend to be more volatile with the potential for high long-term returns but also large short-term swings in value; bonds, which are fixed-income investments that are popular in conservative portfolios but have lower return potential; money market accounts, which involve allowing a bank to make low-risk investments in CDs or government securities and tend to be low-return but stable; real estate, which can rise in value over time and can be transformed into high returns by specialized investors; and cryptocurrencies, such as Bitcoin, which are growing in popularity and are expected to become more stable in the coming years, though they are currently volatile.
Conservative vs. Aggressive Investment Strategies
Investing and portfolio strategies can be divided into two main categories: aggressive and conservative. An aggressive strategy involves investing more in stocks or other volatile markets, such as cryptocurrencies, while a conservative strategy involves investing more in bonds and money market accounts. Aggressive investments generally offer a higher return over time, but they also come with higher risk. Conservative investments, on the other hand, are more stable but offer a lower potential return. The best investment strategy for you will depend on your financial goals, timeline, and risk tolerance. A mix of both aggressive and conservative strategies may be appropriate for some people. If you have short-term financial goals, such as saving for a wedding or building an emergency fund, a more conservative strategy may be best to minimize risk while still earning a good return. On the other hand, if you are saving for retirement over a longer period of time, an aggressive strategy may provide the best potential return. However, it is important to remember that your investment strategy should be reviewed and updated as your financial goals and risk tolerance change.
Choose The Right Investment Plan
It is often beneficial to seek professional help with investing, whether you consider yourself an expert or not. However, it is important to be cautious about who you trust with your money. To find a reputable firm or platform, consider the following tips:
- Choose a fiduciary, which is a company or organization that is legally required to act in the best interest of its clients. Not all brokers or investment firms are fiduciaries, so make sure to ask before making a decision. If you find a firm that is not a fiduciary, ensure that it prioritizes client security and well-being above personal gain.
- Understand the investment strategy used by the firm or platform. Some firms offer personalized portfolios that you have a significant role in selecting, while others use a formula or automated system to choose investments. Make sure that the strategy used by the firm you choose aligns with your financial goals and needs.
- Consider your budget when comparing firms and platforms. Look at the minimum balance requirements and fees to determine which options are feasible for you. If you have a tighter budget, consider a platform like Ellevest that allows you to choose an account with a lower minimum balance.
- Trust your instincts. If you get a negative feeling about a firm or platform, it is important to trust that instinct and look for other options. After all, you are trusting this company with your financial future, and you should feel confident in its ability to act in your best interest.
- Look for firms that support Women: It is important to choose an investment firm or platform that understands and supports the unique challenges that women face in the industry. In addition, consider the companies that the firm or platform invests in. Are any of them led by women or do they have a pro-women mindset? While this may not directly impact your returns, supporting companies with a pro-women stance can contribute to financial equality in the long term. Despite the increasing number of women investors, there is still a gap between the number of men and women in the investment market.
Resources: Where to look for help and inspiration
According to Ellevest’s Susan Thompson, one of the first steps for women looking to begin investing is to do some research. Thompson recommends accessing quality content online to learn about different options. She advises going to places where the content can spark thoughts and ideas about investing.
If you’re looking for information and advice on investing as a woman, there are several resources available online. One of the best is Ellevest’s “What The Elle” newsletter, which provides insights and financial advice specifically for women. The Women Investing Network’s podcast is another great resource, featuring interviews with entrepreneurs, financial experts, and top-tier investors. The Everygirl is a website that offers advice on a range of topics, including investing and bridging the gender pay gap. For a more comprehensive look at personal finance, try the Money Girl podcast, which covers a wide range of topics in short, easy-to-understand episodes. If you want to get a feel for the stock market without risking any real money, you can try a stock market simulator app. The Wall Street Journal is another excellent resource for staying up-to-date on investment trends and tips.
If you’re interested in automating your investment strategy or want to start investing on a small scale without using a broker or financial firm, an investment app might be a good option for you. When you search “investment apps” in your app store, you’ll see hundreds of options, but not all of them will help you grow your savings and achieve a good return. It’s important to do your research and choose an app that aligns with your financial goals and risk tolerance. Some popular investment apps include Acorns, Robinhood, and Betterment. These apps allow you to invest small amounts of money and offer a range of investment options to suit different risk tolerances and financial goals. Keep in mind that while investment apps can be a convenient way to invest, they may not offer the same level of personalized advice and support as a financial advisor or broker.
Acorns: is an investment app that allows users to automate their investing strategy by rounding up their purchases to the nearest dollar and investing the spare change. For example, if you spend $3.50 on a coffee, Acorns will round up to $4 and invest the 50 cents. Users can also set up recurring investments to grow their savings over time. Acorns offer a range of investment portfolios that are tailored to the user’s financial goals and risk tolerance.
Robinhood: is an investment app that allows users to buy and sell stocks, ETFs, and options commission-free. The app also offers a feature called “Robinhood Gold” which allows users to trade on margin and access additional research and analysis tools. Robinhood is popular among beginner investors due to its low barriers to entry and user-friendly interface.
Betterment: is an investment app that offers a range of investment portfolios tailored to the user’s financial goals and risk tolerance. Users can set up automatic investments and track their progress through the app. Betterment also offers financial planning services, including retirement planning and tax-loss harvesting. The app charges a management fee for its services, which is based on the size of the user’s investment.
Fidelity: Fidelity is a financial services company that offers a range of products and services, including investment options. The Fidelity app is a mobile application that allows users to manage their investments, access their account information, trade stocks, and more. The app is available for both iOS and Android devices and is designed to provide users with an easy and convenient way to manage their investments on the go. With the Fidelity app, users can view their portfolios, track their performance, and make trades all from their mobile devices. They can also view market news, research investments, and access educational resources to help them make informed decisions about their investments. The app also offers a variety of tools and features to help users customize their investment strategy, including the ability to set up automatic investments and alerts.
ETRADE is an online brokerage firm that provides a platform for individuals to buy and sell stocks, bonds, mutual funds, and other financial instruments. The company also offers a range of services and tools to help investors manage their portfolios, including market news, research, and analysis. ETRADE also offers retirement accounts, such as IRAs and 401(k)s, and provides access to financial advisors for those who need additional guidance. ETRADE’s platform is available through its website and mobile app, which allows users to trade on the go. The company charges fees for its services, including trading commissions and account maintenance fees. ETRADE is a popular choice among novice and experienced investors alike due to its user-friendly platform and comprehensive range of investment options.