You’re not alone if you’ve ever asked yourself, How does investing work? It’s an area of adulthood that can sound intimidating if you’re new to the game, but one that is necessary if you want to build your wealth.
Enter Priya Malani, an entrepreneur and founding partner at Stash Wealth, a financial planning firm for H.E.N.R.Y.s™ [High Earners, Not Rich Yet]. Ahead, she’ll explain why we need to move past our fear, get educated, and start investing so we can work towards our goals. It turns out it’s not as complicated a topic to understand as it may seem — and the earlier you start, the better.
When I talk to women (and men) I typically hear something along the lines of “I work really hard for my money. I’m afraid to invest it because I don’t want to lose it”. Can’t argue with that.
“In my experience of over a decade in the industry, the bridge between fear and confidence is education.”
If you’ve ever had this thought, you’re not alone — not by a long shot. A recent study by SoFi and Levo shows that a good majority of Millennial women have extra money each month, after paying bills but aren’t investing for the reason above: fear.
Timed to Equal Pay Day 2018, the co-branded study, titled “How Millennial Women Invest” shows that while millennial women are financially responsible with their budgets — with 70% of us reviewing our bank accounts once a week or more frequently and 53% of us have an emergency fund, 56% of us who have the money to invest do not do so because fear is holding us back—and this is a problem.
The unfortunate part about that this is, women are making more money and are more powerful than ever before, but we are still behind when it comes to investing and financial planning.
But the fear isn’t just related to losing money. It’s related to other things like not knowing how and where to start, the indecipherable jargon, the seemingly complex strategies it takes to invest well, and simply not knowing the right questions to ask.
As a financial professional, I have personal beef with the male-dominated wealth management industry because it has historically kept women from achieving their financial goals — which is partly to blame for perpetuating the fear-factor. The industry has no interest in educating us about investing.
So most of us put it off, not knowing where to turn, and failing to consider the repercussions of not investing . . . when, in fact, investing doesn’t have to be that complicated.
Here are the most common reasons women aren’t investing and why you should start.
The excuses for not investing
1. This sh*t isn’t taught in school
I find it surprising that no matter what profession we choose, understanding how to be smart with our money is essential, yet, it’s the one subject not taught in school. We learn Spanish, French, etc. But in order to adult, we need to speak the language of money.
2. It’s too risky
One of the most common misconceptions I see is the confusion between investing and gambling. Just because you have a few thousand dollars sitting around, doesn’t mean you should buy Facebook stock or bitcoin. That’s gambling – not investing – and not how you build wealth.
3. Where to start
I’m confident that the internet is both the best and worst thing to happen to us. When most people research how to invest, they end up in a black hole of obscurity. There is no clear-cut answer on how and where to get started.
Tell Me Again… Why Do I need to Invest?
Investing is a powerful medium that will ultimately change the trajectory of your wealth potential and help you accomplish your mid- and long-term goals. Goals like buying a home, starting a family, taking time off from work, and retiring in style. And while you may be worried about the potential for loss if you DO invest your money, I can guarantee the only way you will lose is if you DON’T invest.
Unfortunately, because of inflation (the cost of things getting more expensive each year) money in the bank is as good as keeping it under a mattress. Over the long run, you’re actually losing around 3% off your money each year by keeping it in savings and not investing it. That’s not a great deal, IMO.
So investing is not your enemy. In fact, it’s your greatest ally in making your money work as hard as you do and it’s vital if you want to turn your hard-earned income into real wealth.
But the #1 reason women should invest is that contrary to popular belief, research shows that we are actually pretty good at it – better than men even. That’s right — according to data from financial services firm Fidelity Investments, women are actually superior investors. In analyzing more than 8 million investment accounts, Fidelity discovered that women not only save more than men, 0.4 percent, their investments earn more annually, also 0.4 percent.
It’s time to level the playing field for women. Together. Here’s how we do it. You in?
At the core, impact investing is designed to effect positive social and economic change. At Ellevest, this is done through impact investment portfolios that work to advance women. With these, you could earn a competitive return so that you can reach our goals — like starting a business, buying a home, starting a family, and retiring comfortably — by investing in other women (brilliant, right?).
3 REASONS WHY WOMEN ARE GREAT AT INVESTING
1. We are less likely to react
The biggest mistake the average investor makes is to get emotional about short-term movements in the market. When you’re investing, you want to keep emotions out of the equation and remember that investing works over time not overnight.
2. We buy right and sit tight
A few years back, Fidelity did a study of all their client accounts and found that the 401(k) seemed to be the best performing account for the average person. The reason why….because most of us forget our password! Crazy, right? But it’s true.
3. We tend to be better at delayed gratification
One of my all-time favorite quotes is: “all long-term investors want short-term results”. Women tend to do a better job accepting that investing takes time to work and don’t meddle with their investments nearly as much as men.
So while it may not feel like it, you’re inherently ready to invest. Time to move past our fear, get educated, and start investing so we can work towards our goals.
In a year of widespread activism, one way you can take action and fight the gender wage gap is start investing in Future You because money is power. Here’s one way you can do it: Get started with a free investment portfolio in under 10 minutes based on your finances and a gender-specific salary curve and then open an account today.