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How to Start Investing (and why you should!)

Author Rosie Hopegood by Rosie Hopegood

There’s an adage in the finance world that men invest, while women save. Unfortunately, it’s more than just a saying there are stats to back it up: here in the U.S., women invest 40% less than men. Meanwhile, we are 14% more likely to save using an employment-related plan.

We get it. Investing can seem risky, too uncertain in these already uncertain times. It also can be tough to figure out how to begin investing. But do we really want to get left behind, squirreling away our savings, when we could be growing and boosting our capital?

Despite many of us being cautious about stocks and shares, there’s evidence that women outperform men when it comes to investing. A recent study showed that women’s investments return 0.81% per year more than men’s, on average. That amount might not sound like much to write home about, but over 30 years the average woman could end up with a portfolio worth 25% more than her male counterpart.

Almost half of millennial women state that money is the biggest source of stress in their lives, while 44.8% of generation X women are stressed about money most or all of the time. While it’s vital to find effective self-care measures that combat stress, working to alleviate stress at its root cause could lead to a healthier, happier life overall. 

How Much Do You Need to Start Investing?

It’s a common misconception that you need big bucks to start investing. If you’ve got a few hundred dollars to spare, you can start investing today. You can then add a little more money of your own each month as much as you can afford. If you have a 401(k), you’ll already have some form of investment for your retirement — any new investment you make now can be kept entirely separate 

You could even try an app like Acorns, which uses your spare change from everyday purchases to make micro investments. 

How to Begin Investing

The two simplest and easiest ways to start investing are by using online brokers or robo-advisors. You also could use a traditional RIA (Registered Investment Advisor), but bear in mind that fees likely will be higher and you may need more of a deposit.

Do It for Me: Robo-Advisors

These digital platforms provide algorithm-driven financial services. You’ll likely be asked questions about your finances and goals, including your attitude to investment risk. You can pick higher risk (and potentially higher gains) or go for a more cautious approach. Popular robo-advisors are Betterment and Wealthfront, and are great for more hands-off investors.

Best for: beginners who want to take the hassle out of keeping up to date with market fluctuations.

Do It Yourself: Online Brokers

For those who are more savvy about following the stock market and want to be able to hand pick which stocks to invest in, then online brokers are for you. Decent brokers will have low fees and resources to help you choose where to invest. Fidelity, Charles Schwab and TD Ameritrade are popular and trusted brokers to get started with.

Best for: people who like to micromanage their investments.

How Investing Differs for Women

Sadly, investment advisory is yet another industry dominated by men. In fact, 86% of investment advisors are men, with an average age of 50 plus. This can lead to a “gender neutral” approach to investing, which ends up using male salaries and career paths as the benchmark. This is something that female-focused investment platforms such as Ellevest are attempting to kick back on.

On average, women value financial peace of mind seven times more than having their investments go up, but when it comes to investing, being risk averse can be a blessing rather than a curse. Often, it can mean that we refrain from investing too much in an individual stock and are less likely to chase higher returns. 

What About Diversifying My Portfolio?

Once you get to grips with the basics of investing, you may wish to start diversifying your portfolio of investments. Put simply, this means having a mixture of commodities, stocks and fixed income investments, which will react differently to market events. This can make your portfolio more secure overall, as while one investment falls, another may rise.

To make your money work for you, you don’t need a degree in economics or a chunky nest egg. You just need to do your research and make sure you find a risk level that you feel comfortable with.


Rosie Hopegood is a journalist, editor and content writer based in London. Her work has appeared in publications such as the Guardian, the Telegraph, Vice and Al Jazeera. 

References:
https://www.theguardian.com/lifeandstyle/2019/apr/08/why-women-need-to-stop-saving-their-cash-and-start-investing
https://www.fa-mag.com/news/most-women-don-t-invest–study-says-43749.html
https://www.nbcnews.com/better/business/why-women-invest-40-percent-less-men-how-we-can-ncna912956
https://www.cnet.com/personal-finance/how-to-start-investing-right-now/
https://www.ft.com/content/f3835072-66a6-11e9-9adc-98bf1d35a056
http://blog.amcpros.com/wp-content/LPL_Financial_Whitepaper.pdf
https://www.ellevatenetwork.com/articles/7138-8-myths-that-hold-women-back-from-investing
https://www.nbcnews.com/know-your-value/feature/women-are-more-financially-stressed-men-here-s-how-overcome-ncna1055901
https://www.thebalance.com/what-is-a-diversified-investment-3305834#:~:text=A%20diversified%20investment%20is%20a,to%20the%20same%20economic%20event.

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