Are Women Missing Out?

Written by Jamie Easton

Women account for 51% of the U.S. population. Yet, according to a survey by S&P Global, only 26% of women have money invested in the stock market, compared to 60% of men. In fact, 65% of women have a large percentage of their money in cash, and 41% of women have no plans to invest that cash.

Is this a big deal? Absolutely. Looking at data over the last decade, the annualized stock market return has been about 14% while the annualized cash return over this time, a paltry 0.5%. Investing in bonds has been slightly better than the cash alternative, but still pales in comparison to stock returns. Bond investments yielded an annualized return of 5% over the past 10 years. To add perspective, take a $5,000 investment made in 2010. With compounding, or reinvesting the gains, the stock investor would be sitting on over $18,000 today, the cash investor on nearly $5,300 and the bond investor on a little over $8,000. While stock returns are more volatile and can vary widely from year to year, over the long term, stock investing is truly compelling and has far exceeded the performance of most other asset classes.

Clearly, women are missing out. Our reluctance to invest impacts our financial futures. The severity of the investing gap compounded by the gender wage gap (women make 82 cents for every dollar earned by men in the best case scenario and that number goes down for most minority women), leads to women only realizing retirement balances that are half the size of men’s, according to data from the Vanguard Center for Investor Research.

If investing in the stock market makes so much sense vis-a-vis historical long-term returns, why do women continue to stay away? In part, our reticence to ‘lean into’ the stock market is due to fear and lack of confidence. Most women crave certainty, especially when it comes to their hard-earned money. When you hold cash in the bank, there is no risk. It’s FDIC insured. Treasury bonds are backed by the full faith and credit of the U.S. government. Alternatively, the stock market is fraught with risk, particularly in the short-term, so women must become more willing to trust in the long-term and remain steadfast. Further, to many women, the stock market seems inaccessible and filled with esoteric terminology that becomes an unspoken barrier to entry. Although investing does come with its own lingo, investing does not need to be complicated, nor is comprehending the markets as hard as it sounds. Fortunately, there are several resources to support you on your investment journey including my own company, The Uptick.

The best way to learn? Jump in. In celebration of April’s National Financial Literacy Month, start now! To get over the fear factor, simply invest a small amount of money in the market. Buy a share or two of a stock in a company that piques your interest and watch closely to see how the shares trades. Learn how that particular stock reacts to news events and monitor its reaction when various economic numbers are released. View this share purchase not as an investment, per se, but as a teaching tool that will allow you to gain stock investing confidence. It will open doors that will enable you to start joining conversations about investing, meaningful and important conversations that you may have avoided in the past. Rest assured, when it comes to stock picking no one is right all the time — even the experts get it wrong, so feel free to express your ideas and thoughts when the topic arises.

Once you get more comfortable with markets, make sure to invest the bulk of your investable assets in diversified funds like ETFs or Index Funds. Don’t miss out on opportunities like investing in your company’s 401k plan, too, if available. Remember, regardless of gender, it is extremely difficult to achieve investing success by choosing a handful of individual stocks — so diversification is key! Armed with knowledge and newfound confidence, you should feel more empowered to invest. Buy a share of something today, hold on for the long haul, so you do not let the next decade of returns pass you by.

Ready to become more financially literate?

* You can also learn more by joining us on Wednesday, April 21st at 12pm ET as we close out National Financial Literacy Month with a session dedicated to women & investing, featuring Jamie Easton from The Uptick.

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