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Studies show that women have better investing outcomes than men, despite claiming less knowledge and confidence, which I find fascinating.
These stats also make me feel quite smug about the countless conversations I’ve had with men who just can’t help but monkey around with their investments, thinking they can time the market and get out before “the crash” and get back in before it bounces back. You might get that right once or twice, but multiple times throughout your savings years? Unlikely.
The reason I think women’s outcomes tend to be better over the long run is really just because we get there almost by default – in general, women tend to be more cautious and shy away from going big in areas where we don’t feel 100% confident that we know what the heck is going on, which means we tend to invest and then just let it ride.
The majority of the women I work with on investment choices and education are actually doing everything just fine, they just don’t know it. That can feel strange, especially for women who are used to hustling for success, but long-term investing actually rewards laziness.
Finding Confidence in Your Choices
The simplest way to invest these days is using Target Date Funds, at least when it comes to goals like retirement or education – goals where there is a pretty clear date when you expect to begin spending the money down.
The entire purpose of these mutual funds is to diversify your investments in a way that is appropriate for someone planning to need the money in the year named in the fund, but without requiring you to “cash in” on that date.
I use Target Retirement Fund 2040, which is the closest year to when I’ll most likely be retiring. I know then that the fund will put my dollars in the appropriate mix of stocks and bonds, allowing me to take advantage of market growth over the years, without taking too much risk for my age.
It also means that I don’t really have to pay any attention to what the market is doing in the meantime because I know that regardless of what happens this year or even in 5 years, it will be higher than it is today in 20+ years. There’s no guarantee of that, but I’m pretty confident saying it’s most likely.
If you want to get more hands-on and make more specific choices besides using broad funds (or you just want to understand more WHY these funds can work), start reading.
I like the books The 5 Mistakes Every Investor Makes and How to Avoid Them as well as Picture Your Prosperity. One book that helped me really understand how the individual stock market works, believe it or not, was Grande Expectations, which is a book about Starbucks that explains in plain English how a company’s stock might plummet in value, despite its stores having lines out the door each morning.
Pick One and Stick with It
Finally, it’s important to understand that there are countless investing strategies and philosophies out there, from opinions on which companies or industries are going to explode or implode, to recommendations on the best way to diversify your savings to take advantage of market movements to even just predictions of how the economy and market will go in the next year.
You can make your head spin if you really want to dig into all the different ideas out there, but the thing you need to know is that no matter what, you just need to do it. Don’t invest money you anticipate needing in 5 years or less and think twice about putting all of your money into one specific company. But beyond that, just being invested is the most important thing.
The biggest mistakes people make with investing usually have to do with over-thinking, over-confidence or over-activity. But if you can, just pick a strategy, continue using it through the years and live your life in the meantime, you should be just fine.
About the Author
I believe that the true meaning of financial security is the ability to make decisions without having to worry about money. There are both factual and psychological aspects of this belief and my mission is to help people find that intersection in their own lives according to their personal values and goals.
I hold the CPA/PFS license and am a CFP® professional, but I don’t sell any products or manage any money. When I’m not writing, I’m working one-on-one with people through my coaching business, Financial Bliss with Kelley Long. I’m also a member of the AICPA Consumer Advocate Council and am frequently quoted in the press on financial literacy issues facing Americans.
I love to apply my own money lessons to my writing as well as break down some of the more complicated financial planning techniques into plain English. My goal in life is for all people to feel able to make their own financial decisions with confidence, being fully aware of the pros and cons of the actions they take.
Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.