From mom to mentor to sister to friend to chef to gardener to their full-time job, many women have no shortage of roles to juggle every day.
And for most women you can add CFO to that list. Almost 70% said they’re in charge of household spending and managing the monthly budget in a recent Ally survey. They’re comfortable with that role too, with the majority of respondents reporting confidence in their money management skills. Despite that financial assurance, most women still fall significantly behind men in saving for retirement. Where’s the disconnect? Investing.
Is it time for women to add portfolio manager to their list of jobs or is there another way to get smart about the stock market?
A Balancing Act
Not only do women have a lot of roles, they face a lot of pressure when it comes to having a thriving work life, home life, family life, social life, etc. The impact of these expectations came to light once again during the pandemic as women began to leave the workforce in droves due to conflicting responsibilities at home and at work.
Even now, the pandemic has had an immediate impact on women’s employment with one in four women considering leaving the workforce or downshifting their careers compared to one in five men, according to a survey by McKinsey & Company. Finding the time for it all is a daily challenge. And having to be everything to everyone can make the thought of adding even one more thing to that list overwhelming.
So, it should come as no surprise that few women are eager to add Investment 101 to that ever-growing litany of responsibilities and expectations. Ally found only 39% feel confident in their understanding of markets and investing — compared to nearly three-quarters of men surveyed. The gap is startling to say the least, but what is holding women back from the markets?
Time is certainly a factor. And that’s understandable. Becoming an investor certainly takes a fair amount of it. You must conduct research, learn the terminology, open an account and if you’re doing the trading yourself, manage your portfolio. Without any background or experience, it can be intimidating.
Risk aversion, or as I prefer to say, being risk aware, also plays a role. And it isn’t surprising given the many responsibilities women are accounting for (children, parents, etc.) when placing their hard-earned cash in the markets. Even among women who are investing, their portfolios tend to trend far more conservatively.
This fear of taking the plunge isn’t helped at all by the persistent gender pay gap, which often makes women more moderate with their money. Women are also excellent savers, putting aside roughly 9% of their paychecks each year (compared to 8.6% for men), according to a 2017 survey by Fidelity. That paired with limited financial education (frequently focused on saving) can create a false sense of financial security.
Ultimately, a lack of resources paired with a seemingly complex system (especially for those outside of it) to navigate is holding women back from the essential task of wealth building. It’s time for that to change.
Time for a Confidence Boost
Here’s the thing: Women may not be investing as much or as aggressively, but that doesn’t mean they’re not good at it. In 2017, a Fidelity survey found that investment portfolios managed by women perform 0.4% better than their male counterparts on average (which may amount to a substantial difference when compounded over time).
Yet this success isn’t enough to overcome women’s lack of confidence in navigating the market and their investments. It doesn’t have to be that way — here are some simple strategies for investing that may help lift the pressure from your daily life.
Open an Investment Account
It’s an obvious first step, but an important one. Our survey found that women who have their own investment account were 31% more likely to be confident in their stock market skills. Apps, robo portfolios and other online choices make it simple to get up and running quickly and with confidence.
Do Your Research
You don’t need to go toe to toe with a day trader, but you should familiarize yourself with key market terms. And get an idea of what kind of companies you’d like to invest in. A good place to start may be the brands you know and love. You don’t have to stop there, but wading into the market with a familiar brand can be a good introduction.
Give Yourself a Break
You’re not going to make millions on your first day, but you can build the foundation for generational wealth. Investing in the stock market is a long-term investment to potentially give you and your family strong wealth-building income for years to come. You will have ups and downs. Keep learning, keep adjusting. You’ve got this.
The first step is the hardest.
Opening an investment account will not cure the gender wealth gap, but it’s a start. The reality is most women don’t invest because it’s simply not put in front of them. They’re not taught about it, it’s not being marketed to them and that’s not OK. Investing is an essential piece of wealth building for many people. It’s time to change these patterns for the better and close this inexcusable gap.
Get started with your investment journey today.
Lindsey Bell, Ally’s chief markets & money strategist, is an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience. Bell’s unique ability to connect the dots between data and real life and craft bite-sized money ideas that people can use and apply stems from her deep background as an analyst, researcher and portfolio manager at organizations including J.P. Morgan and Deutsche Bank. She is known for demonstrating why and how an understanding of all things money improves a person’s finances and overall wellbeing. An ongoing CNBC contributor, Bell empowers consumers and investors across all walks of life and frequently shares her insights with the Wall Street Journal, Barron’s, Kiplinger’s, Forbes and Business Insider. She also serves on the board of Better Investing, a non-profit focused on investment education.
Click here for more content from Lindsey Bell.