We get it—investing is intimidating! Just when we think we’ve got our money figured out, we don’t. Likewise, the anxieties of understanding financial jargon can often leave you puzzled and downright scared.
Despite being a total "big girl thing," investing doesn’t have to be hard—we promise! With a rainy day fund and enough in the bank to cover living expenses, effective investing has the ability to help you achieve important life goals.
Fidelity reports nine out of 10 women manage their own finances and many are continuing to take control of their financial futures. Consistently identified as more risk averse, willing to acknowledge what they don’t know, and more thoughtful in trading activities, it’s no secret women are naturally excellent investors--so natural, they exceed their male counterparts when it comes to producing returns.
No matter where you are in life, we know you have dreams—but the question is how can a Womanista get there? To help you get started, we outline tips for novice investors. Once you start--slowly and carefully--you’ll be ecstatic to see your little nest grow!
While professionals can make educated guesses off the top of their head, most of us can’t do that. Read up on as many resources as possible and don’t be afraid to ask questions. With the investment world’s wide range of financial avenues, the more you know, the better you can figure out how to build a wealth plan best suited to your values, skills, and resources. The U.S. Department of Treasury advocates for and promotes financial literacy, a vital skill to help cultivate wealth and enjoy economic security.
Create investment goals
If you don’t create a plan, you won’t end up anywhere you like. So what do you do? Lay out a course of action, starting with a budget. Be sure to define your goals and assess risk tolerance. As you set these short- and long-term objectives, decide how much risk you’re willing to take. Since markets are volatile, it’s essential to be realistic. While certain investments have the greatest potential for return, they also carry the greatest risk.
Diversify your portfolio
Well-diversified portfolios generally include assets, such as fixed income, real estate, hard assets and securities. While organizing these effects is critical in formulating financial goals, Kaplan suggests spreading them over a variety of different investments. Many experts believe this method helps performance fluctuate less because the loss from certain investments are balanced by the gains in others.
As Kaplan best puts it, investing is “a luxury that keeps paying itself back for years to come.” In light of her primary goal of empowering women to be financially independent, she says one of the most common mistakes investors make comes from refusing to diversify their portfolio in hopes to minimize risk.
"In reality, it can be much riskier to have your investments tied in one asset class," she says. "On average, an all-bond or all-stock portfolio will be riskier than a diversified one."
One of the major secrets of the wealthy is an investment account. Kaplan shares how women can get started with structuring their own by building assets through the 50/30/20 guideline—a minimalist method that has you exploring your needs, your wants, and your savings and debt repayments.
Kaplan explains that ideally no more than 50 percent of your take-home pay is for essential needs (“Sorry, a handbag doesn’t count,” she says), 30 percent for wants and fun, and after paying off debts, 20 percent can be devoted to investments.
Being able to earn an income is a huge asset in itself, but many women in America will need to create additional income streams to build their wealth and grow their assets. Focus on boosting income or maintaining it through saving and budgeting. Bankrate suggests turning talent and expertise into a second source of income, while continuing your full time position. Increasing income can help you build the life you want, pay down debt and open up more opportunities to save money.
Retirement might seem like eons away, but financial security isn’t solely about achieving short-term goals—it’s about your life now. To get you started, define your retirement, create a budget, then take stock of those assets and evaluate your lifestyle.
“Thanks to the power of investing and compound interest, any efforts made now pay off exponentially in the future,” Kaplan says. “It’s the difference between taking small steps every day and climbing a mountain later in life.”
Devise payment plans
“Anything is achievable through a long-term plan, including eliminating your debt,” Kaplan says.
Instead of throwing money at an issue, the finance expert shares how she constantly encourages women to come up with a financial road map and a realistic plan to tackle their debt.
“Realize that debt isn’t just a money issue—it’s often indicative of our behavior,” she says. “To tackle debt, you need to take a long, hard look at what got you in the situation in the first place. Was it one big, unexpected expense? Or is your debt due to poor shopping habits? Debt will often spiral and never get fixed if you don’t tackle the underlying behaviors.”
Financial advisers and planners
Consulting with professionals can give you a lead when creating a valuable investment portfolio. Though an added expense, advisers and planners help identify risks, biases and talk you through volatile markets. An ideal candidate is fully licensed, regulated and a certified financial planner (CFP). Go one step further and find out if your prospective CFP is a fiduciary adviser like Elle Kaplan. Fiduciary advisers do not sell products and are held to the highest legal standard--meaning you can be assured you are getting advice in your best interest.