Invest Like a Woman: How Women in the U.S. Can Take Advantage of the Stock Market

An unexpected result of the COVID-19 pandemic is an increased number of women investing in the stock market. It’s challenging to determine the e...

By Devin Partida

Due - Due

This story originally appeared on Due

An unexpected result of the COVID-19 pandemic is an increased number of women investing in the stock market. It's challenging to determine the exact reason for this — but the pandemic's impact on the economy is one possibility. More people, especially women, are facing new concerns regarding their careers and financial security.

It's also possible that more time spent at home means women now have the opportunity to explore investment applications like Stash or Betterment. Whatever the reason, it's critical to look at some of the reasons why women were hesitant to invest in the stock market before the pandemic.

Note the actionable ways women can use the stock market.

Here are some critical insights from a survey and some actionable ways women can use the stock market to their advantage and hopefully attain future financial success.

Gender Differences in the Stock Market

A recent NerdWallet survey had key findings regarding the stock market and women's roles in potential investment opportunities. Statistics were drawn from a poll of 2,000 U.S. adults, both men and women.

NerdWallet asked questions about how women and men learn about investing, general feelings about it, and the perceived advantages and disadvantages they face regarding long-term opportunities. It found that less than half of women invest in the stock market instead of 66% of men.

Here are some findings from NerdWallet's survey worth noting:

  • Women are more likely to delegate their investment portfolios to an outside source rather than manage it themselves
  • Women are less likely to learn about investing compared to men
  • Women experience feelings of anxiety and confusion when it comes to investing
  • Americans believe women have advantages and disadvantages when it comes to investing in the U.S. stock market

There's plenty more to review in the survey — the gatherings listed above only scratch the surface. The investing world can be complex and sometimes ambiguous to the average person, regardless of gender identity.

Advantages and Disadvantages of Women Investors

According to NerdWallet's survey, here are some of the perceived disadvantages women experience when investing:

  • Earning less than men annually means less money to invest
  • Women experience career changes associated with caregiving
  • There's a lack of encouragement to invest from others

These are some examples of the perceived advantages women experience when investing in the stock market:

  • Women are less likely to make risky investments compared to men
  • Women are less likely to be overconfident when investing
  • Women are more likely to listen to financial advice regarding investing

It's a commonly known fact that women tend to make less than men annually. Evidence supports the concept of a gender wage gap, which can impact a woman's ability to invest and achieve financial growth.

According to the U.S. Bureau of Labor Statistics, women's yearly earnings were 82.3% of men's, which is a societal problem many organizations are trying to address. While it is an ongoing issue presenting various challenges to women, it's likely that the pandemic only increased this gap.

For example, some women faced career disruptions and shifted to part-time work or quit altogether to address familial responsibilities.

It's critical to acknowledge these factors when considering a woman's decision to invest or not. It's possible that for some women, leaving their jobs could cost them thousands of dollars that could otherwise be spent on investments.

How Women in the U.S. Can Take Advantage of the Stock Market: What to Know Before Investing

One of the first steps a woman should take before investing in the stock market is to assess her current level of financial intelligence. It's best to do primary research and learn more about the stock market before jumping into a potentially risky investment.

Consulting a financial adviser is a wise investment in and of itself — they can help guide women on the ins and outs of investing and if they're in the proper position to invest their money. Whether saving for retirement or paying down debt, taking steps to educate oneself before investing is essential.

There are plenty of online resources people can use to educate themselves about investing and getting started. Consider enrolling in a free or cost-effective course online to learn more about the stock market, how it operates and how to gain the most benefits from it.

There's an option out there for every type of female investor, and the sooner one begins investing, the more time the money will have to grow.

5 Ways Women Can Invest in the Stock Market

Below are some investing suggestions one should consider if they're interested in investing in the U.S. stock market. Remember that this is not professional financial advice but rather showing you several good places to look where you can start investing — for novice investors.

1. Select an Investing Approach

Because there are different ways to invest, it's critical for women to assess their current financial situation and base their investment approach on it. Here are some types of investments to consider, along with brief descriptions of each:

  • Growth investing: Focuses on purchasing equities from various sectors (tech, energy, aerospace, etc.) that may increase in value over time
  • Value investing: Purchasing stocks that are typically undervalued
  • Income investing: Investing in stocks or bonds that generate a steady income
  • Socially responsible investing: Investing in companies that match one's social responsibilities, such as green energy or environmentally friendly companies
  • Small-cap investing: Investing in smaller-scale companies that have a market cap

Each approach is different, and women can leverage the stock market by choosing the best method based on their financial situation and knowledge.

2. Narrow Down a Budget

With any financial investment, setting a budget and sticking to it is vital. Remember that it's best to invest extra funds one may have rather than the money needed within the next five years.

For example, it would be too risky to invest potential college tuition money. Instead, use common sense when investing and understand that many external factors contribute to the stock market's volatility.

During this step, it's crucial to analyze one's risk tolerance to account for the ebbs and flows investments are likely to experience. Preparing for market volatility will ensure finances are protected from external shocks.

3. Open an Investment Account

Various companies offer women the opportunity to open brokerage accounts, which is the primary platform for taking advantage of investment opportunities. However, beginners should stick to a standard brokerage account or an individual retirement account (IRA).

These types of investment accounts will allow investors to buy stocks, mutual funds, and exchange-traded funds. As a result, investors will gain more control over their investments and be able to apply their selected investing approach.

Companies such as TD Ameritrade, E*Trade, Charles Schwab, and more are viable options for women interested in getting started on their investment journey.

4. Choose and Invest in Stocks

The primary consideration to make while choosing which stocks to invest in is their volatility. Those that are considered flashy or popular may not be suitable for a beginner investor. In contrast, those with lower volatility may be a better investment in the long run.

Managing risk is the bread and butter of stock investing. For women just starting, keeping risks low is crucial to building a stable investment portfolio. Start by just trading one stock at a time — monitor how it performs note its characteristics.

Each stock is unique and has its own personality. One popular type of stock worth noting is meme stock. These are purchased by organized retail traders using social media platforms. They had high short interest rates, which led to a squeeze, sending their prices up and up.

Keep in mind that it's easiest to invest little by little as time goes on rather than purchase a ton of stocks all at once. It's best to build up experience with several different ones before going full force into investing.

5. Maintain a Diverse Portfolio

Being able to maintain a diversified portfolio for investments is vital to see money mature over time. Minimizing the risks while investing long-term is the best way to accomplish this.

It's critical to build sufficient capital before choosing to diversify and develop confidence in the stock market and taking on this goal. Remember that diversification is not so much about the number of stocks or bonds purchased but more about creating a stable portfolio.

Choosing to diversify will likely yield the highest return on investment, making this an attractive goal to set at the beginning of the journey.

Avoid Common Investing Mistakes

The last thing investors want is to see their hard-earned cash fall by the wayside or go to waste. So avoid these common pitfalls beginner investors tend to make as they start investing.

Chasing the Latest Trends

While listening to expert investors is not always the worst approach, women should research the stocks they plan on investing in before making any decisions.

Before putting money into the market, read up on the stocks everyone is chasing or consider investing in index funds, which grow slowly over time.

Following Advice From Social Media Platforms

There are so many influencers online who claim to be expert investors. Instead, take advice from a trusted, professional financial adviser.

Using social media is excellent for entertainment and staying connected with friends and family, but it's not always the most reliable, trustworthy source for financial information. If you use social media — it's a starting point but, for sure, beware.

Having Unclear Investing Goals

Because money is power, setting specific goals will help investors reach them faster and more effectively. Setting milestones allows investors to choose how to allocate their assets and invest accordingly while minimizing potential risks.

Consider using the SMART goal-setting concept:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-bound

By following the suggestions for investing above and avoiding the most common pitfalls, women can use the stock market to their financial advantage.

The Future Role of Women in the Stock Market

Investing in the stock market doesn't have to be intimidating. Unfortunately, women have occasionally lacked the confidence to begin investing.

Remember to start small, setting defined goals, and learn as much as you can through the process — this is a surefire way to begin.

The goal is for more women to invest in stocks to secure a financial future for themselves and their families.

The post Invest Like a Woman: How Women in the U.S. Can Take Advantage of the Stock Market appeared first on Due.

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