Wildly successful women have a lot in common. From a steady work ethic to killer confidence and street smarts — they have the “it” factor — and while it may appear like it takes massive intellect to become successful, that isn’t necessarily always the case.
Thankfully, these days being a “successful woman” isn’t defined as just one thing. . . and while there are many ways to get to the top, there is usually one common denominator we’ve noticed among all successful women: they set good habits and they plan for their future (and that includes planning for their retirement and investing their money).
In theory, investing money is a no-brainer: You put a percentage of your money away and let time (and compounding) turn that loose change into a small fortune.
Why wouldn’t you do it?
Unfortunately, the truth is the majority of women aren’t investing their hard-earned cash, and it’s a hugely costly mistake.
The recent market lurches can be enough to give any investor pause: Maybe just keep your money in the bank? Nice and safe. Wait to invest. Ok, but.. there’s a price for that safety.
That’s according to Sallie Krawcheck, the co-founder and CEO of Ellevest, the only women-focused investment platform. The seasoned Wall Street veteran asserts that the gender investing gap — the notion that women invest less than men — costs women at least $750,000 over the course of their lives. **
That being said, if you haven’t already, you should start investing today because the truth is, the earlier you start, the more successful you’ll be – even if you start with nothing (or in student debt).
If this is your first-time investing, we’ve done the hard part for you. We sat down with Krawcheck to ask her exactly what you need to know to start investing .
Ready to make money? Here are five essential things to know about investing.
1) Investing should be a habit.
Investing should be a habit. This means you invest a bit out of each paycheck every month. You grew up learning about putting money in a savings account. Investing is the next step: start putting money in an investment account where your money will be invested in the markets and you get a chance of earning returns.
When do I start?
Forget about “timing the market.”
It seems like the popular way to define a “good investor” is someone who magically knows when to buy and sell to make the greatest return. The truth is, almost no one (even those who do it for a living) does this well.
Data shows that just 0.1% of money managers outperfrom the markets over a 5-year period.
Instead, when you invest steadily, sometimes you’ll “buy low” and sometimes you’ll “buy high.” But overall, you may see market-like returns over time.
How Much Do I Invest?
If you’ve paid off all your high-interest debt and built your emergency fund (three-six months of take-home pay held in cash), then you’re ready to take that next step towards building a more healthy financial future for you and you should start to invest your money.
The experts, including Krawcheck advise that you invest a flat percentage of your paycheck. Here’s how to break down your paycheck, according to Krawcheck
Try the 50/30/20 philosophy to budget your income
50% TO NEEDS
Half of your pay should cover the essentials: food, home, clothes, etc.
30% TO FUN
Seriously. The stuff that gives your life texture: shows, trips, dinner out with friends, whatever makes your life all yours.
20% TO SAVINGS/INVESTING
This is money for “future you.” Her needs and wants should be covered too.
What if you don’t have much to invest, should you still bother? Short answer: Yes. Long answer: Hell yes, girl! Wherever you are with saving, get started by getting with investing today — you literally have nothing to lose.
Try it now: Contrary to popular belief, you could start investing in less than 10 minutes. Let your money work for you this summer — and every summer after that — while you focus on the playing part. Who’s in?
Diversify your investments: it helps lower your overall portfolio risk. You know instinctively that diversity is a good thing: A range of different personality types at work make a great team. Keeping a few irons in the fire is better than putting all your eggs in one basket.
Get the right balance
The more time you have, the more risk you may be able to afford. Each investment goal needs its own mix of stocks, bonds and alternatives (all called “securities”), and the composition depends on how much time you have until you want to “cash out.” For instance, if you have 30 years before you need to use your money, you may be able to take on more risk with a larger portion of your portfolio in stocks. If you only have a few years, less so.
Diversify even more
Your stocks, bonds, and alternatives should be diverse too.
You want broad exposure across different markets so you have a better chance to ride out the volatility among any one of them.
Think about stocks from different-sized companies, in different industries, and from different countries.
Think about domestic and international government and corporate obligations.
These can include foreign and domestic real estate, natural resources, and even commodities like gold and wheat.
Think you need a lot to invest? You really don’t – all it takes it $1 to make your first investment. Get started today.
Try it now: Ellevest is fiduciary, and their number one goal (24/7/365) is making investing a better experience for you. It’s that simple. Get your complimentary financial plan from Ellevest today — you literally have nothing to lose.
3) Keep costs low.
WTF? (What’s the fee?)
Remember when we explained how compounding may help you earn money on the money you invest? And we showed how your money may grow when you keep contributing to your investment accounts?
Don’t worry, that’s still true — but we need to address the creepers of the investing world. Fees, and how to keep yours low.
What you can expect to pay
Remember, there’s no such thing as a free lunch. When you start investing with a broker-dealer or an investment advisor, they will most likely charge a fee for their service. There may be other hidden fees associated with the securities that you buy. These lil’ guys can eat away at your earnings like termites.
Don’t be afraid to ask how much you’ll be charge
Everyone charges you. Some just make it more clear than others.
If a broker-dealer — a human one or online — says their service is free, know they’re still getting paid somehow. This is usually in the form of sales commissions.
4) Ask: Are you a fiduciary?
Fiduciaries are legally obligated to act in their clients’ best interests, putting their clients’ interests ahead of their own. They must try to avoid misleading clients and disclose material facts to clients and prospective clients.
Fiduciaries must disclose conflicts of interest
…Such as how and where they receive compensation for selling you certain products that they have an interest in. It also means a fiduciary must offer you suitable investments, appropriate for your risk-capacity, and financial goals.
Other Types of Advisors: What is not a fiduciary?
In your investing quest, you may also encounter broker-dealers. Broker-dealers may also be called “financial advisors,” but they are not investment advisors or fiduciaries. They are not legally obligated to tell you when they have an interest in the security they are recommending for you.
Yup, so the person you are hoping is watching out for your best interest is actually acting in their best interest. Ask: are you a fiduciary?
Try it now: At Ellevest, their number one goal (24/7/365) is making investing a better experience for you. It’s that simple. This isn’t something they say because it sounds warm and fuzzy; they say it because they are a fiduciary.
5) Get More Conservative As You Go
When you start investing in a retirement account at an early age, you may have a lot more in stock or stock-based securities. Though stocks are riskier, they may offer a higher return. When you’re young, you may be able to afford being more “aggressive” with your retirement portfolio because if something goes wrong with the markets, you may have time to make up for losses before you retire.
Less time = lees risk
Say it’s the year 2047 and you’re getting ready to retire…
Your company has planned your goodbye party. That same day, something awful happens and the stock market takes an Olympic dive. If you were mostly in stocks, you’d probably lose a ton of the money that you were planning to retire with.
But if your portfolio was more conservative around your retirement year, you’d have less to worry about.
Prepare for landing
At Ellevest, when you invest for a down payment on a house or to start your own business, you set a date for that goal. Ellevest then works to help your investments get more conservative the closer you get to that date, so you have a 70% chance of achieving your goal with your target amount of money (or more).
Try it now: For those new to investing, Ellevest offers a hands-off approach to investing, while still helping you work toward your goals in a way that’s best for you. Plus, they are