Many women manage their own money. This includes women who have always been doing so and women who are relatively new to the world of investing, for whatever reason.
Regardless of your level of investing experience, there are certain investor traits that can prove advantageous for anyone. Traits such as patience, willingness to confront and deal with mistakes, and recognizing when help is needed can benefit portfolio returns, particularly for a long-term investor. Even risk aversion, sometimes a problem for women who are concerned about their investing abilities, can be an advantage if it’s applied wisely.
Chances are you’re in good company. Plenty of people know less than they should but aren’t willing to recognize or admit it; as a result, their portfolios suffer. Recognizing what you don’t know can be an asset. Being willing to ask questions and understand some basics will serve you better than sticking your head in the sand.
Also, being a good investor doesn’t mean you need to do all the work yourself. A financial professional can help you set a strategy, select specific investments, monitor their performance, and make adjustments as circumstances dictate. There is no assurance that working with a financial professional will improve investment results.
Many investors’ portfolios have suffered because of a failure to recognize an investing mistake and deal with it; instead, their owners hang on, waiting for a turnaround that may never come. As the saying goes, “Good investors know how to take profits; great investors know how to take losses.” There’s never been an investor who hasn’t experienced losses; smart ones follow a discipline that helps them know
not only when to buy but also when to sell an investment or adjust a strategy that hasn’t worked.
When people feel unsure about their investing skills, they sometimes take the path of least resistance and invest very conservatively. In some cases, this can be helpful. For example, avoiding big risky bets that can single-handedly drag down a portfolio can sometimes lead to better risk-adjusted-performance. However, this trait can also be a double-edged sword if you’re investing far more conservatively than is appropriate for your goals and circumstances, either out of fear of making a mistake or from not being aware of how risks can be managed. Being unaware of how inflation can affect investment returns or how to balance various types of risks can leave you vulnerable to a shortfall in your retirement savings or other financial goals.
You don’t have to become a financial wizard to understand principles that can help you manage risk. Having a child involves many risks, but it’s the rare parent who knows everything that will be needed before taking the plunge. You prepare as best you can and improve as you go along; it’s the same with investing.
All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful. But perhaps the biggest risk of all is not taking the steps needed to try to secure your financial future.
Excessive trading costs have historically been one of the reasons individual investors often underperform the stock market as a whole. A portfolio is — or should be — a means to an end, not a competitive sport. It’s a way to pursue your financial goals, rather than a measure of self-worth or a vehicle for bragging about how you “beat the market.
Being familiar with the following concepts can equip every woman to be a smarter investor:
Odds are you make many purchasing decisions every day. That means you have a lot of opportunities to observe products and consumer behavior. Everyday life can be a rich source of information that can be applied to investments. For example, if all your friends seem to be flocking to a new retailer or buying a certain type of product, you might be seeing an emerging trend or company whose value hasn’t yet been recognized by Wall Street. That doesn’t mean you should invest without additional research, of course, but your own daily experience can suggest ideas to explore. Conversely, if you notice that a trendy item that was so hot last year now seems to be showing up more often in clearance bins than shoppers’ carts, you might want to see whether the stock is a candidate for sale.
If you’re afraid to make decisions because you don’t know a mutual fund from an exchange-traded fund:
If you’ve already started working toward your goals but aren’t sure you’re on the right track:
Equipping yourself to pursue your financial goals is time well invested.
Note: Before investing in a mutual fund or exchange-traded fund, carefully consider its investment objective, risks, fees, and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.