5 tips to make you a more confident investor

Posted by Cathy McCabe.
I see it in headlines and hear about it in my workshops all the time: Our old friend, the gender pay gap. What I hear much less about is the investing gap: Women don’t only earn less in the workplace; our investments earn less, too.
But rest assured, there are no systemic barriers to buying stocks, only psychological ones. In other words, the fault isn’t in our stock markets, but in ourselves. Knowing this is really empowering because it means that there’s action we can take right now to rewrite the story. 
Until now, you may have been stashing your dollars away in your employer plan’s default fund, or perhaps, following some rule-of-thumb contribution rate. Making choices that are more in line with your beliefs and long-term goals, rather than knee-jerk, fear-based decisions, requires confidence in your investment abilities. Here are the 5 steps to help you become a more self-assured investor:
#1 Educate yourself. The language of equities and mutual funds is easier to learn if you’re willing to spend some time online, reading a wide range of blogs and message boards. You can learn a lot from the comments section, a lively forum of nuanced, real-life examples where advice is sometimes more expert than the musings of “experts” themselves. Seek out a community of women to share resources with and get tips; take advantage of workshops and workplace education. 
# 2 Gauge your comfort level. Knowing yourself is another key part of your education. If you haven’t done so already, fill out a risk tolerance questionnaire to find out your investing style. How nervous do you get when you think about putting money in the stock market? Would a loss cause sleepless nights? Knowing your comfort level is a vital step. Women can be more risk averse than men, and this often has an emotional underpinning. Find an advisor you feel comfortable with and trust enough to talk openly about your goals and concerns. Most importantly, get a plan in place that will keep you on track.
#3 Figure out how much you’re comfortable investing. Many younger people I meet seem to spend more time planning their next vacation than they do planning their financial future. But younger people can get the most out of stock market investing. That’s because they are working with timeframes well into the future, and have time to let their investments compound. Obviously, it’s nicer to think about a mid-term pleasure than it is a long-term goal, but to be a bold investor, you need to define what your goals are–to be clear about what you’re investing for. Generally, any money you don’t need for at least 10 years in the future, may be invested in an equity mutual fund. Also, your tax bracket can be higher while you’re working, so putting as much pretax money as you can into a 403(b), 401(k) or IRA may be a smart move tax-wise.
#4 Diversify your holdings. A portfolio that is weighted towards lower risk assets means you won’t feel much of a loss during market downturns. To work toward a comfortable future, you may need to balance your portfolio with some growth-oriented, “risky” holdings, and that may cause you some initial discomfort. So, rather than make any sweeping changes to your asset allocation, take it slowly. Do only what makes you feel comfortable. You may consider dipping a toe into equities to test the waters at first, rather than plunging yourself right in. If you have spread your investment risk across different investment types, you are potentially buffering yourself not only from gut-wrenching plunges, but from inflation, which outpaces lower risk investments over time. No strategy assures success or protects against loss.
#5 Protect what you’ve built. What often causes women to be conservative investors is loss aversion–a strong desire to protect the assets they’ve built for themselves and their families. A life insurance policy can help provide for your family in the event that something happens to you, and the financial security you bring; while a long term care policy can help protect your estate from potentially ruinous care costs later in life.
Remember, there isn’t as much of an investing gap between men and women as there is a confidence gap. And over time, it can cost you even more than the more notorious gender pay gap. Unlike the latter, this one is totally in our hands, because boosting your confidence level requires nothing more than a bit of effort!
Teachers Insurance and Annuity Association of America has sponsored Ask the Expert posts for informational purposes only. Many of the experts are unaffiliated with Teachers Insurance and Annuity Association of America, College Retirement Equities Fund, and their affiliates and subsidiaries (collectively TIAA), and TIAA makes no representations regarding the accuracy or completeness of any information on the posts or otherwise made available by the experts. Statements of external featured experts are solely their own and are not endorsed or recommended by TIAA.
Responses from experts to questions posed by Woman2Woman community members are intentionally general in nature and are not intended to give personal, financial, or specific advice. Some strategies are complex, and more information is often needed to determine the personal needs of a community member. We strongly recommend that you consult with a financial advisor before taking any action based on an expertʼs opinion or other information you obtain from the Woman2Woman:Financial Living site so that all of your personal circumstances can be taken into consideration. Participation in the site does not render the member a client of the expert or of TIAA.
This site is not designed to accept or respond to requests or complaints regarding specific TIAA accounts, products or services. If you wish to discuss an issue of that nature, please contact TIAA at 800-842-2252. TIAA is not responsible for any opinions provided by members of this site. TIAA is not responsible for the content or privacy policies of third-party sites to which you may link.
The TIAA group of companies does not offer tax or legal advice. You should consult an independent tax or legal advisor for advice based on your own particular circumstances.
The material and responses are for informational or educational purposes only and do not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. The material and responses do not take into account any specific objectives or circumstances of any particular individual, or suggest any specific course of action. Investment decisions should be made in consultation with an investorʼs personal advisor based on the investorʼs own objectives and circumstances.
Experts may not have medical or scientific training. Any information related to physical or emotional health is not intended to be used in place of a consultation with a physician.
TIAA is not responsible for the statements of community members. We may link to posts made by community members only to direct you to topics that may be of interest to you. This does not mean that we agree with the opinions of these community members. Their statements are solely their own and are not endorsed or recommended by TIAA.
June 12, 2018