Thanks to their level heads and focus on long-term goals, when women invest, they tend to do it well. In fact, they outperform men by nearly half a percent.
But for those who don't invest or are just getting started, the world of investing can seem like a mystery, full of unfamiliar terms.
Regardless of where you are in your investment journey, make sure you get started and have a plan, said Liu Liu, director of investment research and management for BOK Financial®.
“Investing is less about beating the market and more about putting your money to work over time,”- Liu Liu, director of investment research and management
What counts as investing?
Even the word "investor" can potentially be intimidating, evoking slick-talking brokers and a "Wolf of Wall Street" mentality. But Liu says it's actually much more approachable—and you may be doing it already.
Think you don't invest? Keep in mind that investments include stocks, bonds, mutual funds and exchange-traded funds (ETFs) in:
- Investment or brokerage accounts.
- IRAs and Roth IRAs.
- 529 and other college savings accounts.
- Health Savings Accounts (HSA).
Making your money work for you
Women tend to outperform men because they take fewer risks with their money. In fact, they're nearly 10 percentage points less likely than men to say they would take big investment risks for the potential of higher returns, according to a McKinsey report.
For women looking to take their investing success to the next level, Liu offered these six tips:
- Identify financial goals and make a plan. Your plan should take into consideration your risk tolerance, financial situation and timeline, according to Liu. "When do you plan to use this money?" she asks.
- Keep assets separate. Once you've created a financial plan, Liu suggests considering a "bucket approach" to keep your money segregated. She recommends the following buckets:
- Emergency savings: at least six months of expenses in a money market account.
- Healthcare savings.
- Education savings.
- Any remaining funds can go into a brokerage account.
- Maximize 401(k) employer match. Often employers will match employees' retirement contributions up to a certain amount—as long as the employee also contributes. Liu recommends taking advantage of this workplace benefit. "If your employer offers a 6% match, you'll want to contribute 6% to your retirement plan to get the full match—adding up to 12% of your income deposited into your retirement account," she explained.
- Review investments annually. At least once a year, Liu suggests reviewing all investment accounts to ensure everything still aligns with your goals and budgets. This review is also a great time to rebalance allocations and make any changes needed to stay on track.
- Start investing early. No amount is too small. "Time is on your side when you start investing early," said Liu. "Even a little money will grow over time thanks to compounding." She recommends starting to invest as soon as you enter the workforce, even if it's just getting a 401(k) match.
- Work with a financial planner. There's no shame in getting expert advice to meet investing goals. "There are different types of financial planners/advisors, and they are helpful in different ways," said Liu. "Do your due diligence to understand the differences, and which one makes the most sense for your goals."
Less confident or underpaid?
Despite women investors outperforming men, they still tend to invest less. Is it because of a lack of confidence, or because they have less to invest?
Liu says it's a little of both.
Women, especially women of color, make less than men, which means they have less to invest. They also comprise roughly 75% of the nation's caregivers. Women caregivers may spend as much as 50% more time providing care than men—often leaving the workforce to care for children or elderly parents.
Even though it's a difficult decision, "we should consider the impact on retirement and other financial goals and whether other options are available before taking a leave of absence to care for others," said Liu.
"We also need more women in finance and investment, which tend to be male-dominated industries," Liu said. "More representation will lead to more investing opportunities for women."