Britain’s women are taking advantage of opportunities that our mothers and grandmothers could only dream of. But while we are climbing the career ladder and earning good money, women generally haven’t yet mastered investing their cash in the stock market, and are less financially literate than men.
Added to this, you may think that being 50-something makes you ‘too old’ to put your money into stocks and shares, but it really shouldn’t: a minimum of five to ten years is advised, so this means there is plenty of time to see returns.
What stops women investing?
What is it that makes women so resistant to investing their money? Having a pension plan in place is a very wise move, but why do so many women shy away from investing in the stock exchange?
Mags, 50, from London, earns an above-average salary and has a pension, but is intimidated by investment products and feels like she doesn’t understand what she needs to in order to make a sound investment in shares and stocks.
We’re the most educated generation of women in history: surely some investment jargon shouldn’t put us off? A study of 500 MBA students in 2009 showed a link between the lower levels of testosterone in females and lesser risk-taking behaviour. But this is not the full story.
A further study, by investment bank Merrill Lynch, found that when women do invest, they consistently outperform men – due to this very same lack of testosterone. The risk-averse element of women’s psyches pays dividend, with women making fewer investment errors and making them less often than men, who could display a more aggressive attitude.
It is never too late to invest in the stock market and there are multiple resources online to help you educate yourself before you jump in.
What to know before you invest
No one suggests putting all your money into the stock market. Stocks and shares are a piece of a wealth-generating financial plan rather than all of it.
Investing consistently in the stock market over a period of time is called ‘pound cost averaging’ and is the way most investors do it. By investing steadily every month rather than in one lump sum, you’ll be in for a ride, catching the market both at peaks and troughs, but you’ll also give yourself the best opportunity to grow your money and minimise risk.
In broad terms, investing in the stock market means either looking to buy shares that you think will increase in value, which you can then sell for more than you paid, or for dividend-paying shares.
While the stock market overall represents a riskier investment than a pension, generally speaking, buying shares that you speculate will increase in value is higher-risk than buying shares that pay dividends.
The reason for this is that dividend-paying shares are offered by businesses that have stood the test of time and are established as FTSE 500 companies. Their share price is not cheap and you’re not likely to buy these shares as a bargain and sell them for a fortune later on.
Their value is that once you have a share like this, you earn income from it for as long as you hold it, provided the market for the company’s products remains.
Buying shares in start-up companies
You can often pick up shares in start-ups or companies that are experiencing huge growth for bargain prices, but to make money, you’re betting on the company staying the distance and start-ups by their nature often don’t. Still, Google was once a start-up, and none of us would turn our noses up at that share now, would we?
Read more: what is equity release?
Index funds are another option for women interested in the benefits of investing in the stock market but not wanting to purchase individual stocks and shares. Index funds are often the least expensive way to enter the stock market. They track sections of the market and provide holders with exposure to large portions of the market without having to actually be in the market.
You can also follow your own favourite companies from shop to stock market. Is Burberry one of your favourite brands? They’re on the stock market and in various funds.
Cindy Gallop, 54, advertising maven and founder of Make Love Not Porn, says: “I talk about money a lot because, and I say this particularly to women, we don’t get taken seriously until we get taken seriously financially.” Don’t overlook the stock market out of fear.