Financial Living Blog

10 Tips That’ll Turn Every Woman into an Investment Expert

Jan 4, 2018 1:10:49 PM

Tips That’ll Turn Every Woman into an Investment Expert.jpegBy Lara Mazek, CFP®

When it comes to investing, does gender matter? The answer is yes.

Whether men and women are fundamentally different is a debate that’s been raging long before the publication of the bestselling book, Men Are from Mars, Women Are from Venus. Though most traditionally perceived differences between men and women have been debunked, the debate may never end (at least as long as one of us continues to leave dirty laundry all over the place).

As far as money goes, however, there is an important definitive difference. Not in how sexes manage and invest money. Though there is some evidence to support there is, which I discuss below. Rather, the difference is in how important investing is for men compared to women.

It all comes down to the irrefutable fact that women live longer than men. Women today can expect to live a full five years longer than men, according to a report by the National Center for Health Statistics. The life expectancy for women in the United States is 81.1; for men it is 76.1. It’s not surprising then that the U.S. Bureau of Labor found 90% of women are single, widowed or divorced at some point in their lives.

This highlights the need for women to invest and to be involved in managing their household’s finances. With that comes financial security and the ability to handle the unexpected.

Here are 10 things every woman should know about investing.

1. You don’t have to be a Wall Street genius to invest

You don’t need a PhD in math or quantum mechanics to become a successful investor. The key is to simply save well, get it invested, and leave it invested for a long time.

It does help to educate yourself on investing, as the more knowledge you have, the better you’ll be in making financial decisions. But, don’t rely on Google for investment advice. The information you get may or may not be relative to your specific situation.

2. You are more than capable

Research has shown that women not only save more money, they also earn a better return on their investments than men. The reason for this is that women investors tend to employ buy and hold strategies, while men have been found to make trades up to 45% more frequently

This may be because men tend to be overconfident in their investing abilities. They make changes thinking they can outperform the market. Most of the time, this sort of thinking – like a man – causes investment returns to suffer. Women, on the other hand, often focus on longer-term goals instead of trying to “beat the market.” When it comes to investing, being able to think long-term is a strength.

3. Don’t choose investments based on past returns

Often, the funds that have the highest historical returns are also the riskiest. Choosing investments on past return alone may leave you with an inappropriate level of risk for your time horizon, or it can leave you with too high of a concentration in one segment of the market. Further, past performance is no indication of future return.

4. Focus on keeping investment costs low

Every investment comes with an investment fee. While they may not look like much, even a very small difference in fees can make a huge impact in your returns over long periods of time. While you can’t control where markets will go, you can control the costs you pay for the ride. The less you pay in investment costs, the more you keep of your portfolio’s return.

5. Your savings rate is just as important as the investments you choose

The surest way to reach your financial goals is to simply save enough. Don’t expect the value of your money to skyrocket based on the investments you pick.

How much should you save? As much as you can – and as soon you can. Even if it isn’t much, compounding interest will do its job best if it is given a lot of time to do so. A surefire way to commit to your savings goal is to automate contributions directly from your paycheck into a 401(k), IRA or other retirement account.

6. Married? Make sure you have assets in your own name

Having unequal distributions of savings in your household can cause stress on your marriage, especially if only one spouse is earning an income. Having assets in your name, no matter who you are, makes you feel safer, more capable and more empowered. Having assets in your own name can also make things easier in the case of a death or divorce. In my opinion, it’s always a good idea to set yourself up with a little bit of financial independence.  

7. Stay-at-home moms can invest, too

If you are a stay-at-home mom, you may not have a 401(k) to stash money into. However, you most likely have the opportunity to make a spousal contribution into an IRA. This can be a powerful savings tool to get retirement savings in your own name.

8. Don’t be afraid to ask for directions

Don’t hesitate to reach out to a professional for help. You don’t need a ton of money before you can get financial advice. Find a financial adviser that you are comfortable with, and you will be much more likely to succeed. You don’t have to, and shouldn’t, wait until retirement to meet with a financial adviser. The sooner you get a professional involved, the longer you can benefit from their advice.

9. Keep your beneficiaries up to date

One of the most important things for a divorced woman to do with her investments is to check her beneficiaries to make sure her assets won’t be left to an ex-spouse. This is something that is often overlooked, and it can cause a very messy situation if left unchecked.

10. Get a financial plan

Choosing the right investments can be a challenge. That’s where a financial plan comes in. It will help you determine the appropriate investment strategy based on personal factors such as your financial goals, income sources and expected retirement date.

Need a financial plan? Click here to contact an adviser for a free plan.

Lara_Mazek350x260-wpcf_350x260-stretched.jpgLara Mazek is a CERTIFIED FINANCIAL PLANNER™ who provides comprehensive wealth management solutions, such as retirement planning and investment advice, to help clients work toward achieving their financial goals. 

    
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