You might be surprised to discover that fewer women invest than men do.
Yet women live longer and earn less than men earn. When that is combined with not investing adequately, it results in a toxic financial situation as women age.
Thinktank ‘Britainthinks’ recently conducted a focus group with 12 successful women to try to understand why so many women don’t invest. It makes interesting reading.
And while several factors are beyond the average woman’s control, there are a few things things that women can do to ensure they protect themselves in their later years.
Let’s look at 5 reasons women don’t invest and why they should.
1. Women Fear Risk
When it comes to investing in stocks, risk can be a huge barrier for many women.
Why is this?
In general, women prefer to be certain about the outcome and the profit they can make. This aversion to risk makes them more reliant on savings accounts, even if the current low interest rates means they make very little money.
They find it comforting that they don’t have to worry about losses.
What they don’t realise is that they still face risk because when the interest rates are less than inflation rates, their money slowly deteriorates.
If you put yourself in this camp, know that by investing your money long term, you would fare much better.
In a recent study, women also regarded property as a safe haven for their savings. But while property can be a solid investment, it does not come without risk.
The same applies to the stock market, which is traditionally viewed as risky.
So risk is always present when it comes to investing. You can’t avoid it but you can mitigate it.
Besides, risk is very subjective. One women’s risk is another woman’s playground.
Improving your financial literacy will go a long way in helping you recognise your own tolerance to risk and find the right solutions and strategy for you. In addition, there are many off-the-shelf investment products available today that are good for everyone, even if you are the cautious type!
2. Lack of Investment Knowledge
When it comes to investments women are faced with dozens of choices, often presented by men and with lots of investment jargon. This can lead to overwhelm so rather than getting it ‘wrong’, they end up doing nothing at all.
Ironically, men aren’t actually better at managing their finances than women!
Research shows that on a day-to-day level women are skilled at shopping for the best deal around, budgeting, paying their bills on time.
Even when it comes to investing, those women who do invest are actually more successful than men are.
The key difference between men and women in the world of investing is that men tend to be far more financially confident and ‘gung ho’ about their decisions even when they aren’t that knowledgeable. In contrast women feel they need to have all their facts lined up and all their questions answered in order to invest wisely.
So what’s the answer?
As a woman who has faced many of these mental blocks but pushed through them I have found that self-education is key.
Educate yourself on the various investments and investment strategies out there. Fortunately, there is a ton of information available online today.
Many women think that the stock market is just for those high roller, high-risk takers that are looking to make a fast buck. But the reality is that most investors are just average people attempting to make wise investments to achieve their financial goals, which are often focused around creating a secure retirement.
Generally, the way to accomplish this is through regularly putting money into a portfolio that is well-balanced and holding onto it for the long term.
3. It’s Too Expensive
Women think that getting the right financial advice will cost too much. They think that seeing a professional financial adviser will be very expensive, but it does not have to be that way.
Numerous advisers provide a free initial consultation. As well, many financial advisors make their fees on the backs of the providers of the products.
Your financial planner should be upfront about how they are paid, and you should never feel awkward or afraid to ask. It just makes sense for you to ask the important questions about the services the financial adviser provides, and how they charge.
If you do end up paying for advice, it can be cheaper than you think and it will be money invested wisely if it gives you a clear financial path to building your future wealth.
4. A Lack Of Trust
One of the key points that came out of the research is that women feel that overall the financial services industry is untrustworthy.
Certainly, the reputation of the financial industry has been tainted by scandals and the recent financial crash. But in recent years, it has cleaned up its act with more transparency and an increase in regulations.
It is important that you get financial guidance form someone with an impeccable reputation, whom you feel comfortable talking with, and that you are okay with providing your personal information, including financial information. If not, then find another resource.
5. Can’t Relate to the Products Offered
When women can’t relate to the investment products being offered, they are turned off by the and often they feel that they aren’t wealthy enough to invest. To have a financial adviser or to invest you do not need to be astonishingly wealthy.
Investors come from all walks of life and a variety of income brackets. The one thing that unites them is they all want to make wise investment and get their money working for them.
What are your thoughts about investing?