What Everyone Can Learn From Women Investors

August 03, 2023

Do you have confidence in your financial planning and investing? If you answered no, you're not alone. Fidelity's 2021 Women and Investing Study found that while the majority of women feel comfortable managing day-to-day finances, they're doubtful of their ability to select the right investments or adequately plan for retirement. Despite this uncertainty, women actually have a slight edge — 0.4% over men — when it comes to long-term gains. How is this possible?

It seems that women tend to stick with tried and true investment principles. Here are five that benefit everyone who invests.

  1. Don't Try To Time The Market

As tempting as it might be to make investing decisions based on global or national economic news, doing so could prevent you from gaining financial traction. Instead, stay the course by investing consistently and riding out market lows.

  1. Embrace Asset Allocation

Placing all of your financial eggs in one basket leaves you vulnerable to market volatility. But if you invest in a mix of assets, a downward turn in one area is unlikely to sink your entire investment portfolio. For example, when the stock market dips in response to negative financial news, a portfolio with dollars spread out across stocks, bonds and cash can better weather the storm than one containing 100% stocks. Since different types of assets rarely move at the same time or at the same pace, establishing an appropriate asset mix based on your risk tolerance is recommended.

  1. Understand Your Risk Tolerance

The ability to emotionally and financially withstand financial market changes helps define your risk tolerance. You must also determine how much money you have available to invest and when you'll need to withdraw funds. Investors with more income and time horizon of 20+ years typically have a higher risk tolerance. You must also factor in the risk of investing in particular types of assets. For example, share certificates or bonds are considered a lower risk asset and are often recommended over stocks for investors with a time horizon of less than two years — regardless of their income.

  1. Grow Your Financial Knowledge

Time is on your side when it comes to investing. The earlier you start, the greater your time horizon and ability to take on more risk. This is why waiting until you understand every aspect of investing before jumping in could be costly. Learn about a particular investment product by reviewing the prospectus and asking questions, but don't let your desire to know every detail about investing stop you from getting started.

  1. Understand It's Okay To Start Small

The only way to start investing is to start investing. You don't need thousands of dollars or a complete understanding of the stock market to start building wealth. Whether you have $500 or $50, making investing a regular part of your financial plan today could allow you to reap the benefits for years to come. Explore lower-risk options like mutual funds, workplace retirement plans and government savings bonds, which allow you to open an account with a small investment.