Making more money is typically easier said than done — but it doesn’t have to be. If you’re a woman who wants to increase her cash flow or save more money for retirement, try your hand at investing. Sure, investing in the stock market does come with risks, but it’s a sure-fire way to start taking charge of the money you make.
“My biggest advice to women who want to save more money is to make more money,” said financial expert Nicole Lapin. “When you stop looking at your financial life as something of deprivation and more of something as aspiration, that’s when you actually feel comfortable taking control of your own finances.”
So if you’re afraid of investing your hard-earned cash in stocks, bonds and mutual funds, don’t be. Here are 10 investment tips for women who want to become better investors.
1. Educate Yourself About Investing Basics
One excellent way for women to gain confidence is by taking action to improve their investment knowledge. According to a 2022 study conducted by Bank of America, nearly one third of women who don’t invest claim it’s because of a lack of knowledge on the subject.
Women must commit to replace fear with the self-assurance that comes with learning more about investing.
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2. Sign Up for a Workplace Retirement Plan
Saul M. Simon, a certified financial planner with Simon Financial Group in Edison, N.J., recommends women investors start investing at work in their 401k or 403b retirement plans. Every dollar that goes into these plans reduces current income taxes. In addition, the money grows tax-deferred, and in many cases the employer matches a portion of your investment.
Don’t let lack of confidence stop you from keeping a healthy portion of your investments in stock funds. Choose a target date fund or low-fee index funds.
By recognizing and overcoming your financial insecurity, you can avoid the common money pitfall of investing too conservatively.
3. Get Investing Education at Work
Many workplaces offer investing education seminars, usually in relation to the company’s 401k plan. Consider attending the next time your company hosts such an educational event.
The lessons you learn might help you invest better, both within your company retirement plan and in other parts of your financial life. For example, they might help you learn about the value of investing in index funds.
4. Don’t Get Emotional When Investing
Ben Offit, a certified financial planner and principal of Offit Advisors gave this simple yet powerful advice: “Do not get emotional. When the market is up, know that at some point it will come back down. When the market is down, it will go back up. Just stay in for the long term.”
Understand that part of investing is knowing that stock and bond funds go up and down in value. Over time, you will learn to better handle market volatility and not be tempted to panic and sell at an inopportune time.
5. Do Research Before Making Your First Investment
With thousands of mutual funds and individual stocks, it can be challenging to choose a few funds for your new investment portfolio. Linda P. Jones, CEO and host of the Be Wealthy and Smart podcast, understands how scary it is to make that initial investment.
When she first began investing, Jones chose a sector mutual fund — an undiversified pool of stocks related to a particular market segment such as energy, healthcare, retail or technology.
After investing, her sector fund immediately dropped 30%, slashing her initial investment by close to one-third. Fortunately, Jones recouped her losses and went on to experience financial success in her investing.
Before you make your first investment, make sure you do your research and seek out trustworthy investment tips. Jones suggested getting a financial newspaper or magazine that has an edition that discusses the top no-load — or “no commission” — mutual funds.
Next, she recommended starting your investing by purchasing an S&P 500 index mutual fund or exchange-traded fund (ETF) that invests in the 500 largest U.S. companies. This gets the new female investor started with a well-diversified investment of established company stocks.
6. Set an Asset Allocation You Can Live With
Assess your current financial situation and future plans to determine how much risk you can stomach. Stocks offer higher returns with greater risk. To reduce your risk, put some money into bonds and cash, which are less volatile.
Once you know your risk tolerance level, invest accordingly. For example, if you are a moderately conservative investor with 20 years until retirement, you might start out with 60%-65% of your investment in stock mutual funds. The rest of your money can then go into bonds and cash.
Marilyn Plum, a CFP and retired regional director of EP Wealth Advisors, suggested that focusing on both strategy and your own risk tolerance level can keep your portfolio in balance, take the emotion out of investing and help you stay the course.
7. Work With a Professional
In addition to DIY learning, women might find a financial advisor to be a welcome partner in the financial education process.
There are several facts to consider that can help you choose the right financial advisor. For example, it is important to understand a planner’s fee structure. Discount brokers might give you basic investment management help for free if you open an account or they may charge $5-$15 per trade. Other advisors charge by the hour, or as a percent of assets under management.
Be mindful of those advisors who make money only when you buy or sell a fund or security. These commission-based advisors might have a conflict of interest.
8. Consider a Robo-Advisor
Women who want investing advice can lower their costs if they try a robo-advisor service. Such services are the latest innovation in the financial advisory field. They largely remove the human element and instead rely on sophisticated computerized investment algorithms to offer investment advice at an affordable price.
Companies such as Betterment, Wealthfront, SoFi, Vanguard Personal Advisor Services and many more provide investors with excellent, low-fee robo-advisor investment options.
9. Start Investing Today and Stay the Course
The length of time you keep money invested is among the biggest predictors of investment success. In other words, the longer the better.
For example, the average stock market return over the last 30 years in the U.S. was 10%. However, when adjusted for inflation, it’s more like 6%-7%. Of course, those returns are averages and not what you’ll see from day to day or even year to year. The stock market fluctuates up and down constantly — sometimes the annualized return is much lower than the average and sometimes quite a bit higher. That’s why it’s important to stay the course to make money when investing.
One of the easiest ways to start investing is if you have access to an employer-based 401(k), which has a preselected menu of investment funds. Choose an amount to invest from your paycheck each month and consider increasing your contributions as you receive raises.
Here’s an example of how your money can grow in a 401(k) over time:
Bree is 30 years old and makes an income of $45,000. She starts contributing 10% of her income to her 401(k) each year, which equals $375 per month or $4,500 per year. She contributes that same monthly amount until she’s 67 and ready to retire. Bree’s employer matches 2% of her annual salary, which equals $900 additional investment dollars per year. At age 67, after investing a total of $194,400, including her employer’s matching funds, at an average annual return of 7%, Bree will have a $1.3 million dollar nest egg to spend in retirement.
Keep in mind that you can contribute up to $22,500 in 2023 to a 401(k), and you can also increase your monthly contributions each year, so the amount you retire with could be substantially more than in the example above.
10. Counteract Your Own Biases
Women need to understand their own fears and biases related to investing and work to counteract them. Here’s how:
Look at data. Remember, even with the ups and downs of the stock market, the average annual return over the past three decades was 10%.
Learn from some of the world’s top investors by reading some of the best investing books for beginners.
Don’t be afraid to ask for financial advice. Your employer may offer retirement planning resources or your 401(k) plan may offer calculators or other planning tools. Additionally, you can consider hiring a financial advisor for investment advice.
New women investors should not allow fear to keep them from investing in the stock and bond markets. Your future self depends upon taking a few reasonable risks now to shore up your retirement nest egg for your golden years.
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Cynthia Measom contributed to the reporting for this article.