Time and time again, we hear that women are intimidated by the concept of investing or reluctant to engage, yet women are becoming financial powerhouses, often leading the way in their own households in terms of being the top earner, paying the bills, and saving for things like college tuition and retirement.
Research on Women Investing
According to CNBC, more women are graduating from college than their male counterparts, they make up half the workforce, and two out of every five women earn the same amount or more than their spouse.
So, why is it that women still have the reputation of being less confident about the concept of investing?
CNBC also reports that along with those promising financial factors, two in five affluent women say they are not at all confident in their investing abilities. These women also say having more money tends to make them thriftier, as opposed to being more willing to take on the risks associated with investment.
A Wells Fargo study found that two-thirds of women that are confident about finances and investment also said they were taught about investing by someone, which could point to one of the reasons women tend to shy away from investment: a lack of information or education on the subject.
Women also tend to be more risk-averse than men, with one-third of affluent women saying the stock market is “too risky” for them in a 2013 Wells Fargo study, also cited by CNBC.
Brad Barber, a professor of finance at UC Davis, conducted a study on gender and investing and came to the conclusion that men tend to be overconfident – particularly as compared to women – and, in line with that idea, men trade 45 percent more than women.
Despite their higher likelihood of participating in trading, men’s net returns were reduced by 2.65 percent, as compared to women traders’ returns which saw only a 1.7 percent reduction.
This study sheds light not only on the confidence gap between men and women as it pertains to investing, but it also shows that women’s inherently risk-averse nature can be beneficial in investment opportunities if they’re willing to take on some of the challenges associated with something like stock trading.
A study conducted by Terrance Odean, a professor at the Berkeley Haas School of Business, found women were more likely to diversify their portfolios, and, despite their lowered risk level, they saw median returns in line with male investors.
Many of these same studies show that women tend to be more focused on preserving their money rather than growing it, but this can present a problem, particularly as women have, on average, a longer lifespan than men, making this an unrealistic and potentially detrimental strategy.
So, what’s the solution for women who want to grow their wealth and become more secure with the idea of investment?
We created this list of the best ways for women investors to learn to invest, and we’re also highlighting some of the best ways to invest money in general.
It’s our hope that this guide will show you to invest your money in smart ways so you can grow it over time rather than saving it with little advantage and minimal returns.
These tips for women are designed for everyone interested in the best ways to invest money, regardless of income, current savings or experience level.
Image Source: BigStock
Learn About Investing
Since many would-be women investors report they’re trepidatious since they don’t feel like they know enough about investment, the key to starting is seemingly simple: learn to invest.
In a 2015 Fidelity survey, 92% of responding women said they wanted to find out more about financial planning, and 75% said they were interested in learning more about investing.
So how can women investors become more comfortable through learning?
- Don’t get overwhelmed by the prospect of exploring the best ways to invest money. Instead, start with the basics and learn at a pace that feels comfortable for you. You don’t have to learn to invest overnight, but rather the goal should be building a strong foundation that you can build on as you foray into learning what to invest money in.
- It can be wise to turn to an investment professional when you’re asking yourself, where can I invest my money? An investment advisor can be a great resource – not just for learning the ropes but also helping you develop a realistic, long-term strategy that’s tailored to your current needs as well as your goals. An investment advisor can also be a fantastic source of information to help you understand the ins and outs of investing, from the simple to more complex elements. It’s important to find someone you’re comfortable with, so it may take some time to find that perfect advisor.
- Inquire as to whether or not your employer offers financial seminars or learning opportunities. Many businesses, particularly larger ones, will have programs offering investing money tips. If not your company, perhaps a local organization will provide these workshops that can help you learn at least the basics of the best ways to invest money.
These are just a few of the many ways you can initially learn to invest.
You can also partner with successful women investors to form a mentorship, or you can investigate where to invest your money simply by reading books and websites offering tips and guides.
Explore Your Options
Along with gaining a general understanding of the fundamentals of investment, you should also explore the various opportunities and find one or even a few that work for you, particularly as you’re just venturing into the world of investing for women.
The stock market can be the obvious answer to the question, where can I invest my money? However, there are also many unique options within the larger economic market.
If you find you’re cautious or risk-averse, you may opt for a mutual fund, which is an investment strategy that pools together the money of many investors into not just one stock or bond but a varied portfolio.
Mutual funds are professionally managed, and, due to their inherent diversity, they can be a great place to invest your money.
If you’re just not ready to leap into the stock market, you do have other options for where to invest your money. A few of these include:
- Real Estate: Real estate is a fascinating way to invest for many people, and while the market, of course, sees ups and downs, it can be a more reliable way to invest your money as compared to the tumultuous stock market. Real estate investment can include buying and flipping properties or purchasing properties, revamping them, and then offering them to renters.
- Peer-to-peer lending: This is a relatively new investment concept but one that’s becoming increasingly popular, not just when it comes to investing for women but for everyone – even veteran investors. With peer-to-peer lending, you’re lending money to borrowers online, and they pay it back with interest. There is a risk because, of course, borrowers could default on their loans, but the idea is that you spread your money around to many borrowers to reduce the risk.
- Small business: Remember, investing in a small business can be an incredibly valuable and exciting opportunity. You can invest your money in your own business or in someone else’s.
Outline Your Goals
Any investment plans should be accompanied by a clear set of goals and objectives, and this is not just applicable to women investing their money but is something essential for every investor.
Your goals are going to guide your strategy. For example, if you’re looking at a short-term goal, you may want to invest your money in something low-risk, like a CD. The returns might not be as high, but this is a safe, short-term place to put your money.
If you have money that you can afford to be riskier with, and you want to create a long-term strategy, this is when you might start exploring something like investing in the stock market.
Your objectives may be a combination of short and long-term goals, but it’s important to have them clearly defined before moving forward with your investment plans.
Start at Work
If you’re just beginning to explore investment, you might want to start at work to give yourself a bit of experience without the total shock of jumping right into something like day trading.
Many employers offer employees the chance to invest in a 401(k), and this is great as you learn to invest your money because it’s simple, it builds your retirement, and it can also help you cultivate your confidence.
Join a Club or Group
If you want to explore what to invest money in and get more engaged in investment, consider joining a club or group.
An investment club is not a new concept, and even if you think one isn’t available in your area, it likely is, maybe even several.
The idea of an investment club is that a group of people comes together to pool their money and make investments, often in stocks or bonds.
Not only does it provide a unique approach to investing for women, but it can also be the perfect way to gain more knowledge about the stock market and investing in general.
You can build relationships with other women investing and also gain more expertise by surrounding yourself with people who have a long history of investment. First-hand knowledge and sharing of experiences can be one of the most valuable learning tools to have at your disposal.
Tips for finding or joining an investment club include:
- Consider your choice to be a long-term one. If you only want to dabble in short-term investments, a club probably isn’t the best option for you. Most of these clubs are based on the concept of long-term investing and will usually only meet about once a month, with strategies extending, at a minimum, three to five years.
- It may take some time to find the right fit for you. Every club is going to have a different approach and strategy, so you may have to expand your search to find one that will work for you.
- Choose a club that has a pretty rigid set of standards in place. Otherwise, it can be disastrous.
- Look for a group that values education as much as overall investing. Many of the best investment groups will have regular workshops and seminars and put a lot of effort into making sure all of their members have access to engaging in education opportunities.
An investment club isn’t for everyone, but it does provide a sense of shared risk that can be more comfortable for women investors, and it can also help you build relationships that will prove valuable in your financial endeavors.
Image Source: BigStock
Invest Your Money in Places You’re Passionate About
Many times, people’s number one financial question is what to invest money in.
One of our tips for women is to look for places to put your money where you feel a sense of excitement or passion.
Of course, this can’t dominate your entire investment strategy, but it can be more compelling and energizing to diversify your strategy to include some areas you feel excited about.
For example, you might feel energized and excited to put your money in a company owned by a woman or led by a female CEO.
Even if this is just a small portion of your investment strategy, it can be good to include a passion area as part of your portfolio, as long as you think it’s also truly a beneficial financial strategy.
Measure Your Progress
As you venture into the world of investing for women, you want to be able to measure your progress and track your investments over time.
It can be extremely fulfilling and rewarding to see your money grow, so consider using an investment tracking software that will compile all of your investments into one streamlined interface and let you access a simplified visual representation of your money’s growth.
This is an excellent way to keep up with your goals, and it can help you refine your strategy over time. It can also be motivating.
Using an organized tracking tool can also help you see not just where you’re doing well, but perhaps where you should change your course as you work to discover the best ways to invest money.
A sound investment strategy doesn’t mean stagnancy, but is, instead, about learning over time, building your financial expertise, and making changes accordingly.
Flexibility isn’t a weakness in investing; it’s one of the greatest strengths you can cultivate over time.
Taking on the Challenge
Women are an increasingly pivotal part of the workforce and the economy in general, and it’s important they hone their financial skills and learn what to invest money in to maximize its value.
As you first learn to invest, it will certainly be somewhat of an overwhelming concept, but, over time, and by following the above tips for women and exploring your options, you can become a well-informed investor.
As you become more comfortable with investing, you’ll grow your wealth and strengthen your financial future.
It’s our hope that this guide to investing for women has answered the question, where can I invest my money? Or has, at least, given you what you need to begin exploring the possibilities.
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