Are you a reluctant investor? If so, you aren’t alone. Many women are hesitant to jump into the investor pool, and research conducted by the Oppenheimer Funds and Allianz suggest three basic reasons why:
1. Lack of Education. Typically, women don’t learn about investing while they are growing up and in all honesty, they are not expected to take on this role. (See: 20 Books to Boost Your Financial Literacy)
2. Lack of Experience. Most women wait until they marry to consider investing and then many leave this task to their spouses.
3. Fear that they will “lose it all.” According to Allianz, some 90% of women fear “losing it all,” and this includes all income brackets.
Despite the reasons for not investing, there are so many reasons why women should be investing today, including the fact that we simply need the money. As women, we face enormous challenges — we earn less, we live longer, and we make up the majority of the seniors below the poverty level. The good news is that more women are investing today. But if you haven’t yet taken the plunge, review my five rules for new investors and then stop procrastinating and get started:
1. Educate yourself about investing. Take the fear out of the process by removing the mystery that surrounds it. Get over any concerns or feelings of embarrassment you might have. Financial education is not typically taught in the schools, but now the information is out there and you don’t have any more excuses. Once you understand the basics, much of the fear will go away. Start by taking classes, reading books, and developing a portfolio of stocks or mutual funds on paper first and then slowly dipping your toes into the water with real money.
2. Build a portfolio based on your goals. Develop an investment strategy to provide you with direction. In other words, don’t invest just for the sake of investing, instead have a purpose in mind. Decide what you want your money to do (grow, provide an income, or remain stable) and then invest accordingly.
3. Do your homework and choose investments for the long-term. Beware of “hot tips” and “sure things,” they rarely work out the way you plan. Instead look for investments that have stood the test of time. If you do your homework and choose wisely, there will be less to panic about if things change because you will understand the factors that influence your investments and you will be able to make buy, hold, and sell decisions based on logic rather than emotion. Remember, the key is to buy good things low and sell them high not visa versa.
4. Invest in things you know and understand. Or, said another way, never invest in things you don’t fully understand. There are too many investment options available to settle for something that you don’t understand or are unsure of. Get comfortable with asking questions. That’s the way you get answers, and when the answers don’t add up or they are incomprehensible, move on. Always be sure you understand what you are buying, including the costs and risks.