By Helwa Sofni
For those who aren’t confident to start investing, learn why you should start investing now.
Did you know, studies have found that women are better investors than men?
A 2017 study by Fidelity Investment found that women earn higher returns on their investments than their male counterparts by about 0.4 %. In 2018, Warwick Business School Study found that women tend to outperform men at investing by 1.8%.
And there are still many other studies that draw similar conclusions. However, the number of women investors is far less than their male counterparts. In Malaysia specifically, women investors make up only about 30% of retail investors in our stock market.
Here are five reasons why more women should get started with investing.
#1. Retire in Style
Many women are aware of their longevity – women tend to live longer than men. This can be either good or bad news depending on how financially ready you are to maintain the extra years.
Women can agree that the most important thing is to enjoy life and be happy – it’s all that matters. And women want this to last till the end of their lives. That may mean having a beautiful home with family around. It may mean having access and choice to either simple or extravagant luxuries. Whatever your retirement dreams look like, one thing is for sure: it definitely requires money!
However, it’s understood that later in life, the biggest issue is health and its associated costs. Thus, it’s crucial to ensure your retirement funds are sufficient to support all these factors. There’s a serious consideration every woman needs to make – to either work hard throughout the years or being smart by making your accumulated money work for you, even when you’re sleeping at night.
The choice is up to you!
#2. Reaching Life Priorities
As women, we may have a lot of things going on in our mind. We think about the many people around us, especially those that we love the most.
As an example of life priorities, mothers have a strong maternal instinct to guide their offspring – worrying whether our children are doing fine and whether they can survive if we’re no longer around. We wish for them to get the best education possible as a foundation for better lives. The best education usually comes with higher costs.
As such, many women are taking charge of their finances with the goal of giving the best to their children. To do so requires adopting a longer-term perspective in order for small monies now to compound and grow into big monies later.
Regardless of your life priorities, the recipe for success includes having an action plan with clear milestones. As women, we have the tendency to allow our emotions to guide our decisions. When it comes to action plans, we need to concentrate on dropping the emotion and focusing on the data instead.
Are you willing to take charge of your finances and your emotions or would you rather leave the future to chance?
#3. Stop Making Losses Everyday – Start Investing!
Let’s talk about saving versus investing. You’re probably aware that in investing, there’s a chance to make profit, but there’s a possibility of losses too. Does saving sound better than investing then? Less risks, right?
The truth is that inflation will erode the purchasing power of your money. For example, your RM3,000 monthly spending today will be equivalent to RM6,200 monthly in 15 years of time with an inflation rate of 5%. This means that by saving alone, you are losing money due to inflation.
Can we women address this just by working hard and saving alone? Can you ensure your salary will double every 15 years just to maintain your lifestyle? What would happen if your monthly needs also increase due to additional discretionary and non-discretionary expenses at that future time? A survey conducted by UOB Malaysia in 2017 found that credit card spending amongst Malaysian women grew 129% in 5 years from 2011 to 2016, which is much higher compared to men at 71%.
In other words, both savings and investing are necessary and they can complement one another by supporting your overall financial standing, which is key!
How do you differentiate investing from gambling? The answer is in education. Educate yourself in understanding what your options are, how they function, and understand the fundamentals. Gambling means going in blindly and leaving things to chance. Investing means using your mind and making educated choices based on knowledge you have gained.
#4. Power of Compounding
If you can understand what the effect of inflation does to the true value of money, it’s much easier to understand the effect of compounding when you invest.
Here’s an example – say you can consistently start investing RM3,000 yearly (RM250 monthly) for 15 years. At an annualised return of 5% per year, this would add up to a total of approximately RM65,000 as compared to pure savings of only RM45,000. The additional RM20,000 you made here is the investment return as a result of compounding.
Here’s another important fact – if you keep investing this amount for a longer period of 30 years for your retirement, what would you expect this to accumulate to? The answer is close to RM200,000 instead of just RM90,000!
#5. Invest Confidently, Live Confidently
Life is always full of surprises, good and bad. While there are things that are out of our control, we should focus on what we can do to take charge before it happens. Thus, the amount of time that you’re willing to spend upskilling yourself on the subject of investment could turn out to be life-saving.
To start investing may not be as complicated as you think once you begin to understand how to do it. When you have a better grasp of it, you will have greater confidence, especially when you start to see your money grow.
There needs to be a paradigm shift on the mentality or mindset among Malaysian women about financial literacy in general, as well as investing. With the improved socio-economic status among women, we should expand our sights to beyond family, fashion, and profession, and get more involved in taking charge of our financial wellbeing.
Growing our money through investments can be extremely rewarding. If you’re worried about the risk and exposure, allocate small amounts of money first but be consistent. There are plenty of low-risk investments that offer good returns. This could lead to a better lifestyle and prepare you better to face any uncertainty that may come!
As a woman, what encouraged you to start investing?
You want to start investing? Contact Helwa Sofni and get connected to a licensed financial planner.