The most talked about investing mistakes are made by men; trading too often, over confidence, market timing etc. The most common mistake that women make is not investing at all. Only 30% of women aged 55-64 feel prepared for retirement while 55% worry about outliving their assets (1). Even though women feel this way they are not planning and investing for the future. Today, 71% of all assets controlled by women sit in cash (2), and since cash is not an investment, overtime inflation erodes their purchasing power.
From all of the research I’ve read – as well as personal experience – women and men look at money differently. Men put a huge priority on growing their wealth, and women tend to be more aware of risk. However, prudent risk is an important and necessary part of investing in today’s market.
The decision not to invest, or investing too conservatively, costs women a lot of money. Some estimates are between $500,000 and $2,500,000 over a lifetime. I have highlighted a few considerations.
You don’t need to know everything about finance to invest
Women are looking for more education, so find an advisor who will take the time to educate you. Remember that you don’t need to be Warren Buffet to make a profit; even Warren Buffet doesn’t know everything!
Have a plan
Financial planning is a fantastic tool for every investor, and is something I find gives women real peace of mind. Imagine one document that shows everything from cash flow analysis, retirement projections, estate considerations and tax planning.
Transparency is improving but it’s still not perfect. Do your homework about the fees for products and advice. If it’s not clear, get a second professional opinion.
Now more than any time in history, women are earning and controlling more money and 90% of women will be solely responsible for their finances at some point in their lives. In fact, women save more of their income for retirement than men across every single income level (3) . Now we need to change our mind set from ‘I earn, I save’ to ‘I earn, I save, I invest!’
1. BlackRock 2015 Investor Pulse Survey
2. BlackRock surveyed 30,500 respondents in 20 nations, including 4,000 Americans, on a broad selection of financial and investment management questions. The US sample comprised 1,960 men and 2,040 women (for more on the survey and its methodology, please visit www.blackrock.com/womeninvestors).
3. Fidelity Investments data, September 30, 2016