The Rising Power of Women in Investing
To help decide if investing is for you, consider the following perspective on the growth of women's empowerment in finance.
Covering the Investment GapThe investment gap indicates that, historically, women don't invest as much as men do. Even though women statistically live longer than men, the reality is many women don’t have a long-term financial plan, are not aware of their investments or are not actively involved in their family's investment planning. However, we do know women are making deposits, paying the bills and writing checks to manage their household’s finances. Often, women are the CFOs of their family's day-to-day financial activities, but they are not as established when it comes to investing. Fortunately, the tide is changing, and women are growing more interested and educated about finding ways to make their dollar work harder and planning for their financial futures.
If you’re interested in starting your own investment journey, the first hurdle is overcoming resistance and uncertainty around investing by setting clear, achievable goals and understanding what investing can mean for providing peace of mind for your financial future. Next, evaluate your personal level of risk tolerance; investing is not always an automatic net gain activity. Women tend to be more risk-aware (understand the potential costs and benefits of a course of action), which is different from being risk-averse (a state where you avoid risks or minimize the amount of potential negative impact of an action). So, when it comes to investing, women typically seek out more information and like to get more details on the outcomes. This mindset can be beneficial in helping you make the investing decisions that are right for you, and in tracking your progress and making adjustments as you work toward your goals.
How the Environment is ChangingThe landscape of investing has changed over the last five to ten years. Millennials and Generation Z are the most finance-educated generations to date, making them more determined to set long-term savings and investment goals. Within this group, women are initiating conversations, attending meetings and taking ownership of investment plans for themselves and their families. To start taking action, set up a weekly time for yourself or you and your partner to go over what can be cut from your budget or shifted from your savings to add to your investments. This small yet meaningful step is one way to join the conversation and get a better feel for you or your family’s financial state.
- How much can I afford to save? How much can I use to invest?
- How are my expenses going to change with age? Do I need to consider additional financial channels to assist with my saving aspirations?
- Will investments help cover expenses my other retirement options cannot?
- Am I going to be able to afford the life I want based on my current retirement and savings?
What Can We Learn from Women Who Invest?Women who invest have courageous conversations about goal setting. Once you have your financial goals in mind, find someone knowledgeable and trustworthy to share them with. A financial advisor can help you create a plan to work towards achieving your goals in terms of spending, saving and investing. Be honest about where you are and where you want to be to set yourself up for success in the long run. Women who invest educate themselves about the different kinds of investment opportunities and how the market works to determine where they are in terms of retirement and what type of risk they can take. Take the time to seek out information before you start investing. Know that you don’t have to be a stock market expert but understanding the basics can help in communicating your goals and keeping track of what’s happening with your money.
Women tend to be patient investors. Investing and portfolio strategies1 are typically broken down into two main categories: aggressive and conservative. Aggressive strategies will put more money into investments such as stocks or other volatile markets. Conservative strategies will put more money into investment vehicles such as bonds and money market accounts. Aggressive investments have the potential for higher returns over time, but they’re also riskier. By contrast, conservative investments tend to be more stable, but without the opportunity for maximum return.
Your personal strategy could be a mix of both and should ultimately be based on your own financial goals, timeline and risk tolerance. Women generally tend to develop a strategy and stick to it and are patient with their outcomes for short- and long-term approaches.
Women who invest build a solid relationship with a financial advisor they trust, one that can help them determine their risk tolerance and risk capacity. Risk tolerance is your willingness to take a risk, while risk capacity is what risk you can afford to take. Understanding where you fall with both will help inform your investing decisions.
It's Your TimeEven with women making significant strides in investing, there is more work to be done. While women are saving successfully and staying the course in the face of market changes, there is still room for more women at the table.
Listen to our most recent podcast with two Wealth Management by CommunityAmerica Wealth Advisors, Ashely Dickson and Taylor Ahern, for further education about investing (also included below). To talk more in-depth about your own investment opportunities, set up a free consultation with one of our talented Wealth Advisors today.