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In conjunction with Women’s History Month & International Women’s Day, this article discusses investing for women, personal finance views unique to women, and the damaging impacts of missing out on this money move.
Fret not, we’ve got some tips for the women who are interested in investing, but have yet to take the first step.
Representing 49.3% of Malaysia’s population, a recent report by Bursa showed that only 30% of Malaysia’s investors are women.
Even on our Instagram page, 60% of our followers are men.
In the past, the onus of earning money and consequently managing it has traditionally been on men.
However, things are starting to change since the turn of the millennium, with women getting better education and starting to participate more in the workforce.
As a personal opinion, we always encourage women to start off their 20s with a job and earn some money.
If they eventually want to stop after having kids to be a housewife, we’re all for it!
But before that time comes, earn your own money & save/invest it.
Being financially independent gives you the freedom of making your own choices, which is extremely valuable.
Statistics
According to the TransAmerica Center for Retirement Studies, less than 70% of American women are investing money for retirement, compared to 81% of men.
Couple this with the gender wage gap & the fact that women are more likely to temporarily leave the workforce due to caretaking responsibilities, women are behind men in almost every investing and retirement saving metric.
An interesting finding that reports results on the contrary – women who invest tend to outperform their male counterparts in terms of returns!
Why Women Don’t Invest
Having observed the women in our life, I came up with 3 theories as to why this is the case.
This obviously doesn’t represent all women, and it could definitely apply to some men too!
1. Less money to go around
Generally, women have less money to go around than men.
There are of course a few factors to this, being the gender wage gap, taking long periods of their career off to start a family, and working in lower paying jobs (admins, clerks, PA’s, etc).
Points 2 & 3 are personal and we completely respect everyone’s choice, but the gender wage gap is something that we can’t overlook.
Based on The Salaries & Wages Survey Report Malaysia 2018, men can earn from 9.9%-30.8% higher than their female counterparts with similar education qualifications.
On a more positive note, Al Jazeera reported that Malaysia has the highest ratio of women on boards of any Asian countries, and the highest percentage of women in senior management roles globally. Malaysia Boleh!
Nonetheless, earning less money means a higher % of your income has to go to necessities, and there’s less leftover for you to put aside for investments. Still, we can always find ways to start, even if the amounts are small.
2. Lower interest in investing
Another factor that contributes to this is the fact that women seem to be less interested in the topic of investing.
Maybe investing for women is just a boring topic?
An interesting theory that caught our attention was the fact that generally, stock investing is portrayed as a men’s game.
Think about it; movies like The Wolf of Wall Street & The Big Short (a movie we highly recommend) show men in suits running around making tons of money, with minimal or even no female participation.
Other than this, stock brokers, financial advisers, & wealth planners tend to be male dominated.
Only in recent times do we see balancing of this equilibrium, with more women starting to participate in the industry.
All these influences could make women feel intimidated and out of place in the world of investing, which shouldn’t be the case.
As we previously mentioned, women investors tend to outperform their male counterparts.
And investing for women is not only possible, but also highly probable.
3. Less Risk Tolerant With Their Finances
You know those “Why women live longer” videos showing guys doing dumb like smashing their heads with a trash can lid? Even the kids are in on it.
Well, reports suggest that men are hard-wired to take on more risks.
A study on mergers & acquisitions found that male chief executives behave more aggressively, being more likely to initiate them, as well as withdraw a previous offer.
When going specifically into the topic of investing, women are on average less risk tolerant.
Investing for women just doesn’t seem like a good idea…
While this isn’t necessarily bad, accepting higher levels of risk and volatility can result in better returns over the long run.
The key here is to be smart about it and only take calculated risks.
Being too conservative with your investments can potentially reduce returns.
When you compare putting money into fixed deposits (3%) vs equity investments (7%), the latter returns 25% higher after 10 years & 58% after 20.
That’s a large chunk of money.
Having said this, everyone’s appetite for risk differs.
A variety of factors comes into play, and the worst thing you can do is to bite off more than you can chew.
For example, having an investment portfolio that is too risky for your personal preferences could lead you to sell during a market downturn, causing even more harm to your money
Through a good amount of research & reading, you’ll start to get comfortable with the idea of taking on some risk as you start to understand the volatility of markets and find the right choice for you.
Investing For Women — What Should I Do Then?
1. You don’t need to be an expert to start – find role models
Something we want to emphasize is that you don’t need to be Warren Buffet before you make your first investment.
Obviously, there’s no harm in knowing what you’re investing in and the fundamentals of your portfolio.
The recent introduction of robo advisors, however, means anyone (and we really mean anyone) can get their feet wet with little to no knowledge.
Read more about robo advisors and how to start
Aside from this, it’s also always good to have role models that you can look up to.
If you’re looking for female personal finance figures, we recommend Ringgit Oh Ringgit, Dear Duit, @suyinvests & @stockaholics.intl.
Of course, we at The Millennial Finance would love to be a part of your journey to investing.
We’d always be happy to answer questions and have a chat when needed!
2. Start small but early
This is probably the number one thing we try to tell friends and family.
We get it, you don’t have tons of money to invest.
But it’s so important to start investing early.
In our article “How Much Money Do You Need To Retire?”, I wrote about 2 main reasons it’s so important for millennials to start early.
Just recently, my sister asked if she should open a StashAway account if she only had RM100 to deposit.
Well, she’s in now!
It’s a good learning experience to see how your investment can go up and down in value, especially in whipsaw markets like these.
We’d even argue that it’s beneficial to start with small amounts.
If you start with RM100, a 20% drawdown (which is quite significant) means you’re only down RM20.
This will hopefully then ease you into the process of going through periods of negative returns (which is very common), helping you avoid mistakes like selling investments when markets are down in the future.
Just start.
Don’t wait for the perfect time to enter the markets or when you’re ready because as my favorite quote goes “The best time to plant a tree was 20 years ago. The next best time is now”.
3. Auto contribute
Something that we’ve also mentioned before in one of our earlier articles.
Just like anything else, the surefire way to be successful in strengthening your personal finances is by enforcing discipline.
Set up auto contributions on a monthly basis, preferably a day after your pay comes in.
By doing this, everything gets automated.
You don’t have to worry about forgetting to invest or not having any money leftover.
Of course, make sure you have enough money for your necessities when deciding on how much!
The 2 investment vehicles that make this easy are Amanah Saham & robo advisors.
The former almost forces you into investing monthly if you go the financing route (you have to pay off the loan, it affects your credit score), and the latter has an easy process to auto debit.
A trick to auto investing is to start with a small amount like RM50 per month.
Once you get comfortable with this, try gradually increasing it over periods of time till you hit your personal max.
When increasing monthly contributions, you’d definitely feel a larger impact from immediately cutting your spending compared to doing small ones along the way.
Investing for women is not and should not be complicated.
We truly hope this article encourages more investing for women.
It’s the best way to build financial strength & see your money grow.
Letting your money sit in a savings account instead of investments could cost you hundreds of thousands in your retirement.
As always, feel free to leave a comment or DM us on Instagram if you have any questions.
If you find this article about investing for women helpful, share it with your friends who need to read it 🙂
Thank you for the shoutout to RoR 🙂