A recent article in the Huffington Post got me thinking about women and investing. More specifically, it got me thinking about why are women afraid to invest?
Also, I read a lot of personal finance blogs. A lot.
And in general sweeping stereotypical terms, one thing I keep noticing is that blogs written by women focus on how to save money, and blogs written by men focus on how to make more money (even though here’s a great list of female investors).
Stereotypes aside, I feel this in my own life. Investing was always something I’d do… later. I’m a pro at saving money, an expert at paying off debt, and a savvy shopper. But mention the word investing, and I tune out. Stocks, bonds, indexes? No thanks. Investing is for the pros.
Why Am I – A Woman Afraid To Invest?
I can’t say for sure that my gender has something to do with my fear, but I can’t say that it doesn’t. It’s a lack of knowledge that holds me back. Or, at least, lack of knowledge is contributing to my tentative behavior.
I wasn’t afraid to pay off $25,000 in credit card debt. More amazingly, I wasn’t afraid to invest in a business by writing a check from my credit card several years ago. But buying stock? Goodness gracious. A balanced fund? This is harder than Calculus in high school, and yet, it matters even more.
Actually, I’ve Been Investing for Years
The other day, I realized something that should not have been such a revelation. I have an IRA. A login and a password at TD Ameritrade. That means I am already investing. Turns out, putting aside money for retirement is exactly the same as investing real money. The only difference is the time it takes to get it back out. And since I won’t be retiring for a long time (longer than I’ve been alive as of today!), I can be more aggressive in my retirement fund.
I think it’s easy to get scared about investing. Even since that realization a few weeks ago, I haven’t done more research as to where I should be putting my money for my golden years.
Reasons to Fear Investing
TD Ameritrade’s Website. You have to learn an entirely new set of investing jargon to be able to do anything at TD Ameritrade. Here’s a fun story (which, actually, probably saved me money in the long run). From 2006 to 2010, I’d been diligently auto-depositing $200 a month into an IRA. This was my “ostrich period” so I didn’t even notice that the money was leaving my account. I’d get email confirmations from them, but the language didn’t seem to shout, “Thanks for putting another $200 into your IRA!” so they would hardly register. Then, when I decided to get serious (better late than never!) I started inputting all my accounts into Mint.
Mint said, “hey, are you sure that you don’t have any investments? Like TD Ameritrade?”
Lo and behold, I logged into my TD Ameritrade account, and saw something like $10,000 sitting there. In my sweep account.
At the time, it was a fortune and I thought that I’d hit the jackpot. I was also thankful that I’d chosen a traditional rather than a Roth, because I would have been so tempted to pull that out of a Roth and right into the 23% interest credit card debt. For a boneheaded move, this one was looking like it was okay!
Also, the fund I thought I was depositing straight into lost 40% of its value between 2006 and 2008, so even though I was earning nothing (less than nothing if you think about inflation!) I didn’t lose money.
It’s Not a Guarantee. Paying off debt, of any kind, at any interest rate, gives you a guaranteed x% return on investment. Absolutely nothing else is guaranteed. That’s terrifying, but also somehow liberating, because if you’re not afraid of losing money, you have much more to gain. I think that when you come from a place where you did lose money, you’re more afraid to lose it. It’s much more challenging to pick stocks, or even pick funds, than it is to shop at secondhand stores.
I’m afraid of big losses, so I settle for tiny wins.
Reason to Embrace Investing Anyway
There are people who make enough money on the interest of their investments so that they (and their children and their children’s children) never have to work again. Frugality helps you live within your means, but investing will expand your means.
And if you’re stuck like I am and want someone to hold your hand as you start to consider opening your first account and start investing, check out The College Investor’s Investing 101 Course.
How did you do it? Are you afraid of investing?
Money Beagle says
I’ve generally been somewhat aggressive over the years with investing, though I’ve really tightened things up over the past few years to where I limit my risk quite a bit compared to what I used to. Probably coincided with when I got married and started my family, which ties back to not wanting to put their financial health at risk with foolish decisions.
krantcents says
I think anything new is scary, however you just need to start slowly. Invest in the toal stock market index for example. Once you get comfortable investing and learning more, you can expand your investments.
Emily @ evolvingPF says
Um, I’m pretty sure I pointed out to you on your last post on “investing” (as in stock trading) on here that you were already investing in your retirement fund!
You haven’t addressed any differences between men and women in this article, just why people in general might be afraid of investing. Personally I have always been encouraged by the generalization that women have better investing outcomes than men do because they are more passive. I started investing at 22 with my first full-time job. My husband, who is more risk-averse than I am, didn’t start until 23 after following my example. So our relationship does not conform to that gender stereotype.
Our blog definitely talks more about spending less than earning more, but the truth is that most of our budget cuts are to enable us to put more money into our Roth IRAs (directly or indirectly). I just think it would be boring to talk every week about how great passive investing is. *shrugs*
Robert says
I always found that interesting as well – how women tend to actually be better investors than men for a variety of reasons (biological, personality, etc.). I read the HuffPo article and was actually surprised that there is a fear factor involved. I always assumed most people were like Kathleen and investing in Roths and 401ks automatically without giving too much thought to it.
MakinSense Babe says
I see your point on being afraid of big losses. Women are inherently less likely to take risks that men will given our lack of testosterone. And, taking big risk leads to big reward, or big loss. But, this isn’t about fear of losing, it’s about lack of motivation.
First off, you can take small risks with your money. Put in a little at a time and learn as you go. I showed one of my friends (who is a guy) how to do this and he’s off to the races. He’s not investing all his money in all at once. He’s taking time to be methodical about it, with the understanding of what he could lose if say, he invests in a bond fund and interest rates go up. He’s taking the time to go through this very slowly.
If you want to invest, that’s what you need to do. Your fear of losing will dissipate because you will slowly understand. So net net, it’s a motivational thing, or lack of, that you’re spinning to “being afraid.” Don’t trick yourself into believing you’re less capable than you really are.
jim says
Women are inherently less likely to take risks re: investing? REALLY????? Wow! You should meet my wife. I’m the conservative investor – not her – she’s all out there (and frankly, it’s paid off for the most part). However, she did lose well over $2K in the 2008-09 crash – but since then has more than made up for it.
Frankly, I’m surprised to read these rather sexist generalisations – particularly at the huff post – a far left wing “paper”.
PK says
This is obviously a generalization… there’s no reason to get offended because you can point to an example where it doesn’t hold up.
If I say that men are, on average, taller than women by three inches… will you link me to wnba.com and say I’m sexist? Fact is, testosterone make a huge difference in risk-taking behavior, and worldwide women live longer (on average, again with that word) by a couple years. Why? Men take more risks. Why wouldn’t that apply to investing, in the aggregate?
Jason Hull says
Science. It works, *******.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2741240/
jim says
Oh, PK – you obviously misunderstood my commet. I wasn’t offended in the least – I’m probably one of the least politically correct people you’ll ever “meet”. I was simply commenting on a personal experience. That’s all. No offense taken.
PK says
Hmm, I guess then we’ve got Poe’s Law incarnate?
Daisy @ Prairie Eco Thrifter says
I think that if anything, it would be a fear of the unknown. I do invest in a retirement savings account, and I’m not afraid at all to invest in tangible things like real estate, but when it comes to investing in mutual funds or index funds, I think it’s more that I just don’t know enough about them. No matter how much knowledge I absorb, I still don’t feel like I know enough.