by Elizabeth Blanchard, Consultant, WFN at Siebert

Women and their role in the investment community

 

Women have recently shown a heightened interest in the world of investment. Playing an active role as an investor requires special knowledge - but today women are learning quickly how to handle their assets.

With the bull market investors enjoyed in the late 90’s came a heightened interest in the world of investing on the part of men and women alike from all walks of life.  For the first time, some of the attention focused on women and their role in the investment community.  After careful observation, there were several trends that could be seen in the behaviors that they exhibited when it came to investing their money.  Here are just a few:

1. Women see themselves less likely to be risk takers than men are. 31.8 percent of women labeled themselves conservative investors, compared with 21.7 percent of men. (1)

2. Women take more time to investigate before they invest than men do. One study found that women spend 40% more time researching a mutual fund before they invest. What's more, they tend to be less impulsive and less inclined to act on a hot tip then men are. (2)

3. Women are less confident in their investing abilities than men are. Only 55.7 percent of women feel confident about their investing abilities versus 64.4 percent of men. (3)

Time and time again, studies looking at women and investing have demonstrated an interesting paradox.  On the one hand, women demonstrated a great interest in learning more about the markets and financial community at large.  What’s more, they expressed a strong desire not just to educate themselves, but to play a more active role in the managing of theirs and their family’s assets.  Despite their interest however, many failed to follow through and as a whole, have remained far less active than men are when it comes to taking charge of financial affairs – investing is no exception. 

One of the keys to helping close the gap between an interest in investing and actually playing an active role as an investor is education.  With education on the fundamental principals that support sound investment decision and the ability to think analytically when looking at a potential investment, or a financial plan as a whole, comes the confidence to jump in that so many women still currently lack.

So in this article, we will take a look at a few of the key building blocks of investing -- that is the fundamental investment concepts you will need to understand to make more informed decisions about your portfolio. 

IT'S A MARATHON, NOT A SPRINT

It's key to understand that although making a quick profit is an exciting part of investing, having an understanding of the basics is key to building a long-term strategy. Investing remains one of the most effective ways to get your dollars working for you today so that you'll be financially secure tomorrow.

THE RISK VS. RETURN TRADEOFF

Investment vehicles vary in terms of risk, from the safer money market securities to the highly volatile futures and commodity offerings. In general, the amount of risk investors take will correspond with the return they can potentially earn. In other words, high risk generally correlates with high return and lower risk with lower return. Where an investor's portfolio falls on the risk spectrum should reflect the particular investor's:

• Long term goals
• Immediate need for money
• Age
• Risk tolerance

UNDERSTANDING YOUR TIME HORIZON

When you're investing for a specific goal, like college or retirement, the amount of time that stands between now and the date you'll need the money will help determine your investment strategy. The reason time horizon plays such a big part in investing is that investments that fluctuate in value have the potential to produce larger returns over time.

If you can tolerate a high degree of fluctuation—that means leaving the money invested through all the ups and downs—you can seek greater potential returns. Then as you move closer to your goal, you can begin to move the money into more stable investments so the money will be there when you need it.