Women Make Better Investors, So Why Are We Scared To Start Investing?
When I began taking control of my finances some pieces of advice seemed obvious, like cutting the unused subscriptions and $7 lattes and never carrying over a balance on my credit card. But once my emergency fund was filled, my sinking funds were covered, and I was no longer facing down the hellhole that is overdraft fees and credit card interest, I found myself in unfamiliar territory: I had extra money.
Embarrassing to admit, but I had never been in this situation before.
Growing my cash pile made me feel safe, but I knew hoarding it like acorns in a low-interest savings account wasn’t going to help me achieve my long-term financial goals, like say, retiring. I knew I needed to learn how to invest, but where to start?
What little I did know about investing had negative associations and felt completely inaccessible to me. My perception of investing came from movies like The Wolf of Wall Street and conversations with men I had dated—not super reliable sources.
Taking to Google to learn the fundamentals did little to ease my concerns. The few YouTube videos I did watch had me feeling entirely overwhelmed and less informed than when I started. Unfortunately this is a rather common first experience with investing.
There is still a man-sized barrier to entry
Last year, when I decided to become an Accredited Financial Counselor, a few people in my life graciously agreed to become my pro bono guinea pigs. In exchange for patiently watching me stumble through advice and responding to a few "let me get back to you on that" moments, I agreed to help organize their budgets and follow up each month to see how things were progressing.
One such guinea pig is a friend of mine who has just completed her doctorate and is entering her career for the first time. Unsurprisingly, I jumped at the opportunity to help her through this major financial transition.
By all accounts, she’s a perfect first “client.” A little too perfect, as she never overspends, has no consumer debt, and is earning more money than she realistically knows what to do with. Within six months of working together, she maxed out her emergency fund and short-term savings goals. Together, we wondered, what now?
I suggested what felt like the natural next step: Investing.
Multiple years of living on a student income have left her with little room for retirement savings, so I suggested we start there. Her response surprised me: “Why do I need to worry about retirement? That feels so far away.”
Throughout my studying, I had spent endless hours preparing to help people pay down debt, create budgets, and rethink their relationship with spending. I was not prepared to convince someone that they should invest. Why had I not been taught how to have these conversations?
The numbers don’t lie
“Women outperform their male counterparts by about 1 percentage point each year.” When I first read this fact about investing, I was shocked I hadn’t heard it being discussed more, but I was not at all surprised to learn the reason why: It’s because we trade our investments less often.1
Fidelity revealed that women are 8% more likely to stay calm during an economic downturn than men, opting to sit on their investments instead of withdrawing them. Men’s net returns are diminished by 2.66 percentage points each year because of their trading habits.
In 2021, Fidelity completed a similar study on 5.2 million account users, which found that women outperform men by 40 basis points (.4%) in a 10 year period.
I have worked with several copywriting clients focused on teaching women about investing, but I realized the opportunities they offered were for accredited investors, which, if you didn’t know, only applies to people who have earned over $200,000 in the past two years, OR have a net worth of $1 million.
I don’t think anyone in my circle is secretly sitting on a million dollars, but I believe they still deserve to feel empowered to invest, whether it’s $1 or $1,000.
Investing isn’t easy, but it's not that hard either
An analogy that may help you feel more confident when making your first investment is to think of it like buying a car.
Before you buy a car, you need to do a baseline level of research to know you’re getting a good deal and not a total lemon. You don’t, however, need to know how to build a transmission from scraps in order to drive it off the lot. There are professionals who will take care of that for you, and it's the same with investing.
Knowing the basics of investing, like where to open an account, your level of risk tolerance, and what you plan to do with these investments in the long run, is enough to get you started. You don’t need to know the intricacies of day trading or index funds to become a successful and educated investor.
If you are feeling nervous to get started, here’s a little insight into how my first experience investing went:
For nearly two years I had money sitting in an old employee sponsored 401(k) account. At the time I was so proud of this accomplishment; it was my only real accumulation of savings that I had not withdrawn and spent.
But no one had told me you actually had to invest the money in your 401(k). I assumed it was automatically done for you after enrolling. I had done the right thing by opting up to the company match, but my contributions had just been sitting in the account collecting minimal interest like dust.
Even now, I feel a pang of embarrassment whenever I review my retirement account and see the graphs of all the months it sat stagnant.
Leave it to Gen Z to save us all
My first thought as I sat down to write this article was that maybe no one around me is talking about investing because people in my age demographic simply aren’t investing, but statistically, that’s not true.
As a matter of fact, Gen Z is investing more than any generation that came before it.
According to Fidelity, 71% of people born after 2001 are currently investing in stocks, bonds, and mutual funds, compared to 68% of millennials, and 55% of Gen X and Boomers.
Today, nearly 7 in 10 women are investing in the stock market outside of their employee sponsored retirement accounts. As you can see from the graphic above, that is up 44% from 2018!
Yet, women continue to have a very different relationship with investing than men. Nerdwallet reports that 29% of women feel anxious about the performance of their investment portfolios, compared to only 22% of men.
Is it a lack of education, or a lack of conversation?
If you fall into the lack of conversation camp, I encourage you to find opportunities to have these discussions with the women around you.
Being vulnerable with your finances is terrifying (as the person airing out all my financial laundry in this newsletter, trust me, I get it), but the opportunity to inspire and encourage more women to invest is invaluable.
By opening up about our financial journeys, we can break down the barriers of intimidation and build a community where women feel empowered to take control of their financial futures.
If, on the other hand, you are financially ready to begin investing but don’t know where to start, I have linked a few resources below, created by women, to help guide you:
How to Start Investing in 2024: A 5-Step Guide for Beginners
Women and Investing: How to Grow Your Wealth & Own Your Financial Future
Investing is more than a hobby; it can mean the difference between having a secure future or being forced to live the rest of your life in survival mode.
Investing offers freedom—freedom to buy back your time and let your money work for you in the background. It's not a get-rich-quick scheme or a cure-all for your financial woes, but it will help ease your burdens and make you feel less scared about the future.
By sharing our stories and resources, and offering support, we can empower the women around us to make their first investment with confidence and agency.
This data came from a study out of University of California by professors Barber and Odea, surveying 35,000 households.
So much good advice here!
Amazing piece! Thank you for sharing 🙏