In my house, my wife looks after the children, and I look after the money, or this was the way until recently. Over the last few years, my wife has got more and more involved in how, and where we invest our money. In my experience, most women, don’t invest their savings. They usually spend it on crazily expensive handbags (or at least my wife does), and if they do save it, its saved in their bank account earning less than 1% interest.
Research shows, the average female investor keeps 68% of her portfolio in cash and cash equivalents. Why is this? It could be because research shows that in 2020, women made about $0.80 for every dollar the average man earned, or because women will generally reach their peak earnings at the age of 44, while Men on the other hand, reach their peak earnings at the age of 55.
Its more likely that the lifetime earnings gap between men and women at retirement age means that women are 80% more likely than men to face poverty in retirement and given that 39% of women have forfeited income or career advancement to care for the needs of children or parents, it’s easy to see why investing could prove challenging.
What is the Stock Market?
Over the years, it has been proven that investing in the stock market will give you better returns than nearly all other investment vehicles. You can track my stock-market portfolio returns here, but you have to go back to 2015 for the last time I made a loss. Last year I made a 24% return, and this year could be even better. Despite the incredible returns, most women I speak with don’t seem as convinced about investing in stocks as their male counterparts. Let’s understand the basics of what the stock market is and how to make money from it.
What is the stock-market? It’s a platform on which you can buy or sell shares of different companies. Shares refer to equity or part ownership of a given company. It makes it possible for individuals to be part owners of a company and enjoy the benefits of ownership, such as capital growth and dividends.
The stock market is vital in the growth of an economy because it enables companies to raise money by selling their shares. It’s a highly regulated market to ensure a secure, fair, and transparent environment for transactions. Granted, investing in the stock market is not a walk in the park, it has often gained the wrong perception such as being volatile and seemingly easily affected by several factors to include;
- Internal or External Factors – such as management of a company, or a shift in the economy, political temperatures, can cause sudden changes in the value
- Being intimidating, complicated, and difficult to understand all the financial jargon. This may put off some investors who may not want to deal with the complexities and may not want to pay a professional to help them figure it out.
- Effectively Gambling – Given the fact that optimum gains can only be realized after a long period of holding a given stock, some investors feel that you can’t tell whether it’s a good investment until after years of waiting. That waiting may make it feel like investing in the stock market is a guessing game. This could scare off some investors.
Of course, there is always a risk of losing your investment in the stock market, however, the rule of making money remains true ‘The Higher the risk, the higher the returns’. To compensate you for the risk you take, the market will reward you more.
In addition, you earn maximum returns by investing in a well-diversified portfolio over a long period of time. Adequate research and professional assistance will help you make a well-calculated risk when choosing the right stock mix for your portfolio. Understandably, investing in stocks can feel overwhelming, and it requires time to see the desired outcome. The same reasons that make the stock market a scary place to invest in are the same reasons women make the perfect investors at the stock market.
In a recent study by the Bureau of Labor Statistics, they found that the average female earnings were 82.3% of men’s. As a consequence of earning less, they’re less erratic in investment decisions, and do more research before investing their hard-earned and money.
As a result of doing more research, Women are therefore more likely to invest in a well-researched company that performs well over the long term. If you’re investing to grow your pension pot, you really want to invest for the long term, take advantage of compound investing and dividend re-investment, and see your portfolio grow over the long term. This is a great way to reach your retirement pension pot portfolio and a key reason to invest.
I would love a chrystal ball to tell me what stocks to invest in to for the best return on my investment. Sadly this doesn’t exist and therefore we need to research companies to find the right investment.
If you look at stock-market historical returns, and invest for one day, you have a 90% chance of losing your money. If you increase this out 12 months, you have a 30% chance of losing money, and if you hold your shares for five years, you have a 10% chance of losing money.
When it comes to investing in stocks, a long-term commitment is core to getting the best returns. This gives the stock time for fluctuations in its value to the point where the stock price stabilizes and earns higher returns. Women are patient investors, leading to long term and steady growth of investments. Women don’t typically jump from one investment to another. Each investment is well thought out and planned for and consequently not easily abandoned, leading to great investment returns.
It’s generally accepted that women live longer than men. The U.S. Census Bureau projects that by 2060, women’s life expectancy will be 87.3 years, while that of men projected to be at 83.9 years. As a consequence, women will need money for a longer period of time after retirement than men.
The problem is that not only do women need money for longer, but due to inflation, they will also need their money to grow, to enable them increase their monthly spending in line with inflation. This calls for women to be aggressive investors, including using investment vehicles such as the stock market, which give better returns.
Unlike putting money in a current account or savings account, investing in stocks will ensure your money is covered against inflation. On top of that, your money will grow and enhance your efforts to build your wealth.
Despite the perceived complexity, it’s actually very simple to set-up an investment account to buy and or sell in the stock market. The whole process from start to finish literally takes 10 minutes and simply involves signing up through an application form, confirming your identity and funding your account. Once it’s all approved, you can buy your first stock using a simple click of your mouse.
Once you’re over the fear of setting up an investment account, buying stock is also very easy. You can see what I have in my portfolio here, however, if you want to really make profits, I would highly recommend that you use a subscription service called Motley Fool. This service saves the problems and worry with regard to choosing stocks to buy, and leaves the whole process to professionals. I have been really impressed with the results they have showed over the last 12 months.