Age and income are often the biggest factors in determining one’s investment strategy, but some personal finance experts believe it’s time for gender to become a bigger part of the decision-making process.
Women are more likely to experience a wide range of life and career events than men, making a gendered approach to investing key for young women looking to build a comfortable retirement fund, said Zena Amundsen, a certified financial planner at Astra Financial, a majority-female group. . Customer base.
“Often women are expected to take time off from work to care for children or care for an elderly parent,” Amundsen said.
“With that comes an earlier career plateau and the gender pay gap, and with that pay gap comes lower (Canada Pension Plan) contributions, as well as a reduced likelihood of maximizing that and having more money in our pockets during retirement.”
This situation is exacerbated by women’s longer life expectancy, which will likely extend five years beyond the average man’s lifespan, he added. Therefore, a less robust retirement fund could have even more dire consequences.
As a result, Kristine Beese, founder and CEO of Untangle Money, says women need to “make their money work harder for them” as soon as possible. Untangle Money offers financial planning programs and services primarily to middle-income women.
“Research shows that women are really good at saving, especially compared to men,” Beese said. to sleep at night.”
Ayesha Ofori, founder and CEO of women-focused investment platform Propelle and former Goldman Sachs wealth advisor, said women need to be aware of the fact that lower-risk investments will often yield lower returns, which is not something they can afford so easily. men.
She recommended women look earlier at capital appreciation investments (which focus on increasing the value of an investment over time), as well as income-generating investments (which can come with regular dividends and interest income payments) to support them through their retirement years. .
“But women also need to consider alternative investments such as real estate and private equity, which provide higher returns than traditional investments,” Ofori added.
To find the right balance between return and potential loss, Beese recommends women stick to high-quality investments in major stock indices.
“Frankly, no one should pursue speculative investments,” he said.
“However, it’s important to keep in mind that we haven’t seen much loss in the S&P 500 over a 10-year horizon, so we’re sticking to ‘financial bouquets’ such as exchange-traded funds that include a group of holdings in these companies, which shouldn’t be a major concern.”
However, according to a 2021 survey from Fidelity Investments, return on investment is not something women have historically struggled with; because their returns are on average 0.4 percent higher than men’s. Instead, greater risk aversion and lower trust create greater obstacles. for women on investing and improving their financial literacy.
“If there is one piece of advice I can give the younger generation to overcome this lack of self-confidence, it would be to force themselves to raise their hands and ask the (finance) questions they need to ask to get started — no matter how scared or embarrassed they are to ask that question,” Amundsen said.
Beese echoed this sentiment, noting the importance of finding a team of financial planners and mentors who can guide women toward their financial goals.
“I know from literature and from my time as a stockbroker that women are not always as goal-oriented as men with their money to begin with because of the way we are socialized to talk about money, and that we normally ask two questions: what can I afford and will I be okay?”
“It’s really important to find a financial advisor or mentor who can meet women where they’re at, because we can often encourage young women through more detailed conversations to set financial goals that might statistically be really important to them. It’s like putting retirement savings first,” Beese said.
Particularly important to Ofori is the idea that investing should not be a solitary affair.
“Talking about money and investing is often seen as taboo (for women); it can leave us feeling isolated and alone in our financial decision-making,” she said.
“Investing doesn’t have to be lonely or boring. Find your cheerleaders and have them hold you accountable for reaching your financial goals.
This report by The Canadian Press was first published Oct. 24, 2023.
Pascale Malenfant, Canadian Press