Investing can be a rather intimidating idea, especially for women.
Women think that in order to invest you have to be rich, which is not true.
Women also think that investing is too risky, which is also not true.
While some investing is very risky, other investing has very little risk. You can invest where you feel comfortable.
Women also think that they purchased a home so they’ve taken care of their investment needs, which is yet another myth.
If you ever plan to have a comfortable retirement, you are going to need to have an investment portfolio and there’s no better time to get started than right now.
I’m going to help you get started by debunking 4 investing myths that far too many women believe.
#1 – Investing takes lots of money
While the old saying ‘you need money to make money’ is certainly true, what’s not true is that you need a lot of money to make money. Mutual funds are a good addition to your portfolio. They are very safe, as a mutual fund is a mix of various investments. There are different kinds of mutual funds. For example, Index funds mirror a certain index such as the S&P 500.
Most mutual funds have a minimum investment that can be as little as $100 or as high as $10,000 depending on the fund. Contrary to what you might think, there are plenty of mutual funds that require $500 or less in order to invest in them. Other funds will waive the minimum investment if you are going to have a monthly auto investment occur, which can be as little as $50 a month.
So ladies don’t let the myth that you need lots of money in order to invest stop you from investing in your future and your retirement.
#2 – It is too risky to invest
Far too often women avoid investing because they think it’s much like gambling.
Sure, when you invest there are never any guarantees, but there are ways to reduce that risk. If you were to invest in a single investment that would be very risky, but still nowhere near as risky as gambling. However, if you broaden your investments then over the years until your retirement you stand a pretty good chance of coming out far ahead – the odds really are in your favour.
There’s always going to be some risk.
The market could tank and your investments could drop in value, but if you don’t sell during that period, and you stay in the investment, more times than not the investment rebounds and starts to grow again.
Some markets are riskier than others, such as new developments in the tech market, but some education and a good financial adviser will help you to navigate the investment world, based on how much money you are investing, how fast you want your funds to grow, what your tolerance is for risk, etc.
Consider this. If your savings interest rate is currently at 1% or less and inflation is around 3% like it currently is in the UK, the money you have in the bank is actually depreciating.
So while sticking your money in the bank might have virtually no risk, what good does it do you if your money is depreciating? You will actually end up with less, not more, over time.
Everything you do has some risk, including not doing anything.
Gambling and investing are not the same thing. When you gamble the chances are high that you will lose because the gambling establishment has set it up that way. Ever heard that saying, the house always wins? Well, they bank on you losing or if you do win, they expect you to use your wins to keep on gambling. That’s how they make money.
When you invest however (provided you know what you’re doing or work with someone who does), then the goal is to risk only what you can afford to lose – small amounts or larger funds, depending on your situation – but ultimately to grow your money.
#3 – Gold is a smart investment
During times when people are concerned with the economy they are more likely to look for alternative ways to invest, and for a very long time gold and other precious metals were what we considered the smart go-to investments.
While gold is a good investment and there is certainly nothing wrong with it, keep in mind that the returns just keep up with the inflation rates and so you are not actually earning a lot on your return.
It is also important to know that there are other much smarter investments than gold such as cryptocurrencies, which are worth exploring and learning more about, as there can be significant growth far beyond staying par with inflation, with these types of investments.
#4 – Your home is an investment
If you see yourself as an investor because you own a home, you would be wrong.
A home might occasionally prove to be a great investment for instance if it was bought decades earlier in your parents or grandparents era or is located in a specific, desirable area when it may appreciate significantly over the years.
But for most of us buying a home today that kind of growth is unlikely.
Research shows that in the USA the housing market in most cases barely stays on pace with inflation. Over the last 100 years the price of houses has only grown at a 0.3% compound annual rate, which has been adjusted for inflation.
It’s also worth remembering that just as house prices can appreciate dramatically they can also go the other way. During the financial crisis not only did property values flatline, most fell and in some cases, fell spectacularly.
Almost overnight many people found that far from being an asset their home had become a major liability and the stuff of nightmares!
Investments typically don’t require regular cash injections. But if your home is your primary residence then there are also running costs to consider; mortgage payments, insurance, bills and ongoing maintenance costs will all have to come out of your own pocket.
This is not to say you shouldn’t own your own home, not at all. Just don’t regard it as an ‘investment’. Owning a home gives you security, provides shelter and can help protect you from inflation.
But it is not an actual investment that will enjoy significant growth like a solid bond and stock portfolio will.
Are there any other investing myths women often have that I have missed out? Please share below.