If you’re a woman paralyzed by a fear of investing, you’re far from alone — many women shy away from the stock market due to insecurity and lack of confidence. But the good news is that with a few strategies, you can gradually overcome your fears and start taking control of your finances through smart investment choices.
Why Are Women Afraid of Investing?
Women are often intimidated when it comes to investing, especially because the finance world has historically been dominated by men and riddled with complex lingo. Plus, in the U.S., women still earn only 83 cents for every dollar a man makes — leaving them with less disposable income to invest. It’s no wonder that many women today feel overwhelmed or discouraged when starting out in the investment world.
According to a survey by the digital investment platform Wealthsimple, the average 30- to 35-year-old man who is investing has put $67,000 into his investment accounts, whereas the average woman investor of the same age has put only $36,500 — almost 50% less. And according to the 2021 Women and Investing Study by Fidelity, 33% of women feel confident in their ability to make investment decisions, while only 19% feel confident selecting investments that align with their goals. In other words, most women fear investing because they don’t see themselves as confident investors.
5 Ways To Get Over Your Fears of Investing
Here are five ways to conquer your investment fears as a woman and make progress toward creating an investment plan that works for you.
Investing can be daunting, especially if you’ve never done it before. So, don’t be afraid to start small. For example, instead of dumping thousands of dollars into the stock market as a beginner, invest $100 at a time. By taking smaller steps initially, you can build up your confidence and learn about the stock market without risking your hard-earned money. As you watch your portfolio grow, you’ll become more comfortable investing a larger amount. And remember to follow the golden rule: Only invest what you can afford to lose.
According to the 2021 Women and Investing Study by Fidelity, only 47% of women know what steps to take if they were given $25,000 to invest in the stock market. If you think you aren’t a part of that 47%, it’s time to educate yourself on how to invest.
In the world of investing, knowledge is power. If you’re scared to take the plunge, it could be because you don’t know enough about how investments work. The good news is that there are plenty of ways to educate yourself so you can feel more confident and empowered when making investment decisions. One way to do so is by reading books about investing, such as The Intelligent Investor by Ben Graham. You can also follow popular personal finance websites, newsletters and podcasts to learn the fundamental investment strategies and terminology.
Diversify Your Portfolio
As the saying goes, “never put all your eggs in one basket.” By spreading out investments across different asset classes, sectors, companies and even countries, you can reduce the impact any single investment has on your overall portfolio and maximize returns.
For example, to diversify your investments, you could spread your portfolio across international stocks, domestic corporate stocks, emerging market stocks, government bonds, large-cap domestic stocks and real estate investment trusts (REITs).
With a balanced and diversified portfolio, you’re less likely to feel anxious about your investment performance and fluctuations in the market. If you’re unsure how to allocate your assets best, consider consulting an investment advisor or financial planner before making any moves.
Look At the Big Picture
It’s understandable how the ups and downs of the stock market can be daunting. However, remember that volatility is normal. Historical data from S&P Dow Jones Indices has shown that bear markets are nothing out of the ordinary — usually occurring every four to five years. Instead of letting fear get in your way and stressing out over the ever-changing landscape of investments, focus on the big picture and your financial goals — especially if you’re a long-term investor. With this perspective shift, you’ll be much better prepared to make smart decisions with your investments no matter which direction the markets turn.
Build a Solid Emergency Fund
Another way to get over your fears of investing is by building a solid emergency fund first. That way, you’ll have some financial cushioning in the event of any unexpected expenses or losses due to investments — and thus feel more confident about making investment decisions.
How much your emergency fund should be will depend on your lifestyle, monthly income and costs, and several other factors. However, the general rule of thumb is to put away at least three to six months’ worth of living expenses.
Don’t Let Fear Take Over
By understanding the risks associated with investing and taking precautions, you can make smart investment decisions based on your financial goals without letting fear take over. The key is to take small steps, educate yourself, diversify your portfolio, build a solid emergency fund, focus on the big picture and build confidence as you go along. Ready to start investing? Check out some of the best online stock brokers for beginners.
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