Statistics have shown that women do well in investing, and yet many women face challenges with getting started. Here's how to overcome that initial barrier
Do you want to build wealth? Do you want to take control of your financial future? Most of us would say a resounding yes. Now to the next question that you might have: “But how do I start?”
Many women face challenges with getting started on their investing journey, whether that’s because of the gender pay gap, or traditional gender roles which limit investing opportunities for women. However the statistics show that women are great at investing. Women are risk-aware investors and once they have done the research they stay the course. So let’s peel away the fear and procrastination. Let’s demystify the three main ways to build wealth through investing: DIY investing, working with a financial advisor or using a robo-advisor platform.
Before you embark on your investing journey, take the time and understand your short, medium and long-term financial goals. Is it to save for a property? Save for your children’s education? Or to take that trip to Greece? Write it all down and keep those goals close as you consider the various ways to financial freedom.
1. DIY Investing
DIY (Do-It-Yourself) investing means exactly that: it’s a method of investing that puts you in the ultimate driver seat to your own wealth creation, build a portfolio according to your needs and educate yourself along the way.
The pros: it’s a very quick way to get started. DIY investing is an empowering journey as you’ll be able to start investing independently and learn a great deal in the process. You can also potentially save on a lot of fees by going about the process yourself. Having control over what goes into your portfolio is another key advantage of this approach.
The cons: The lack of guidance and support along the way from experienced investment professionals is one of the main disadvantages. The time commitment involved in this process can also be substantial as you navigate building your own portfolio and doing the necessary research. Managing the emotional aspect of investing is also something to consider—DIY investors are subject to emotional biases which can impact decision-making, such as fear during market downturns or overconfidence during strong markets.
How to get started with D-I-Y investing: Open a brokerage account and start investing. Start by educating yourself about basic investing principles such as asset allocation, diversification, and risk management. Although it might seem daunting to pursue this approach, bear in mind that there are many tools out there in the market that can make this process easier for you. Online ETF databases can help you simplify your research process and financial education platforms like Sophia can help you in your overall investing fluency. Begin with small investments and gradually increase your portfolio as you gain confidence as an investor.
2. Working With a Financial Advisor
Partnering with a financial advisor offers professional guidance and expertise tailored to your unique financial situation, goals and aspirations. This collaborative approach can provide you with valuable insights and support on your investment journey. Advisors can also help you on a wide range of your financial needs: from retirement planning, budgeting and tax planning, to estate planning and anything else you might need to support your financial goals.
The pros: Financial advisors bring specialised knowledge and experience to help you navigate complex investment decisions and optimise your portfolio. Advisors also work closely with you to understand your goals, risk tolerance and time horizon. You’ll also get more customisation as they can develop an investment strategy that aligns with your aspirations. Advisors can also help reduce the emotional bias of decision-making during market fluctuations and help you stay focused on your long-term investment goals.
The cons: Working with a financial advisor typically involves fees, either based on a percentage of assets under management or as a fixed rate for specific services. While advisors consider your preferences, the final investment decisions are made on your behalf, potentially limiting your sense of control over your portfolio. It can also be challenging finding the right advisor who aligns with your preferred investment and communication style.
How to get started on working with a financial advisor: Begin by researching and interviewing potential advisors to find someone who understands your goals and communicates effectively. Get referrals from your friends or colleagues on great advisors. Once you’ve found an advisor you’d like to work with, be transparent about your financial situation, aspirations, and risk tolerance. Maintain regular communication with your advisor to ensure your portfolio aligns with your values and evolving needs.