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4 Myths about Women and Investing Debunked

Traditionally, men have controlled household finances. They make investing moves, major money decisions, and handle all relevant financial accounts. But the winds are changing (and we’re not big on being traditional around here at Hedgehog). 

Today, women are making remarkable leaps and bounds when it comes to their personal and household finances. In fact, they control about one-third of the wealth of US households, and that’s only expected to rise. But people still have some misconceptions about women and investing so in this blog, we’ll debunk the 4 most common myths about women and investing, and uncover a few facts that may surprise you.

Myth #1: Men are better investors than women

The reality is that one gender is not predisposed to being a better investor than the other. Being good or successful in investing isn’t about being a man or a woman. The most successful investors have the same traits. They:

  • Educate themselves about the market
  • Research investments before investing
  • Set measurable and attainable financial goals
  • Make informed decisions based on research and professional advice 

The verdict? Anyone can be a prosperous investor if they put their mind to it. Don’t let stereotypical norms hold you back.

Myth #2: Women are too concerned with risk to invest

Money and investing are stressful for everyone. A Bankrate survey found that 52% of Americans agree that money has a negative impact on their mental health.

On average, women tend to be more conservative investors and take on less risk, but this is not because of a lack of confidence or financial literacy. Women are more likely to conduct extensive research and due diligence before investing, making them more risk-aware than their male counterparts.

Remember that risk-averse and risk-aware are two completely different concepts. Risk-averse means that you don’t like engaging in risky investments, while risk-aware means that you identify and assess the risk of an investment. Because women tend to be more thoughtful with their investments, they consequently tend to take on less risk. Risk-aware investors are also more likely to create a well-balanced portfolio with a mix of stocks, bonds, and alternative investments.

All smart investors understand the importance of analyzing and studying an investment’s risk before making a decision. Risk is present in all investments, and the most successful investors recognize that and consider their goals and timelines before investing.

Myth #3: Women are more likely to make emotional investing decisions

A Fidelity study shows that 60% of all women actively invest in the stock market and take a less reactive approach to recent market fluctuations than their male counterparts. Because women tend to invest with long-term goals in mind, they are more likely to ‘wait out’ market dips and not obsess over market ups and downs.

However, emotional investing boils down to inexperience rather than gender. To avoid making radical investing decisions, keep up to date with market trends, diversify your portfolio, and partner with a trusted advisor who can ease your fears. Regardless of your goals, timeline, risk tolerance, or gender, the more educated you are about your investments and the market itself, the smarter your investment decisions will be.

Myth #4: Women aren’t interested in investing

Investing is actually very popular among younger women. 71% of Generation Z and 63% of Millennial women actively invest in the stock market. 

The moral of the story is that everyone, including women, wants to build wealth and achieve their goals.

Fact: Women don’t invest enough

Despite the fact that they tend to be highly successful investors, a majority of women simply don’t invest enough. If you’re new to the world of investing, all of the financial jargon can be quite intimidating, but getting started is much easier than many people realize. Take it one step at a time. Here are some best practices for women just starting out in investing:

  1. Get started ASAP: Good investing takes time. Don’t get swayed by “get rich quick” investments. You can buy a lot of investments, but you can’t buy more time. So get started as soon as you can, even if you can only contribute a limited amount of funds.
  2. Do your research: You can never ask too many questions. Find an investment that you fully understand and if your gut feeling is to walk away, walk away. If you’re not 100% comfortable with an investment, it’s not the right one for you.
  3. Look for compounding investments: Compound interest is when you earn interest on the money you’ve invested and on the interest you earn throughout the investment. So you’re earning interest on interest, and your funds will grow even faster.
  4. Minimize taxes when possible: It always comes back to taxes. Investing in pre-tax vehicles will reduce your overall taxable income, so you will pay less to Uncle Sam. But let’s face it, taxes are confusing, so we recommend working with a tax professional to ensure that your investing strategies are tax efficient.

The path to building better wealth

Investing is an incredible opportunity for women to build wealth, reach financial freedom, achieve short and long-term goals, and secure a comfortable retirement. As you embark on your investment journey, remember two things: confidence and education. The more educated you are, the more self-assured you will be in your investment decisions. 

As you consult with your financial advisor about your individual investment goals, consider diversifying your portfolio with an alternative investment. Alternative investments like Hedgehog are not dependent on the success of the market and can be a great option for investors looking to diversify with a high-performance investment. Learn more about our model here and get in touch with our team if you have any questions.

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