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Investing: The Final Frontier of Feminism

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My Two Cents on Easy Ways to Begin Investing and Managing your Personal Finances as a Finance Nerd (Part 2)

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There are so many small and easy steps that young women can take to become financially secure. I dream of a world where young women are just as excited to talk about index funds, interest rates and oil prices, as they are about wedding dresses, Black Friday sales and French manicures. Many research studies show that because women are less likely to invest their money, they earn far less than men over their lifetimes. It is often due to a lack of knowledge and self-confidence. Sallie Krawcheck, the founder of Ellevest, called investing the final frontier of feminism. Throughout the world, women make less money than men for the same work. We are all acutely aware that there are still many glass ceilings and things out of our control.

In comparison, investing our personal savings is completely in our control. We don’t need a boss to sign off on our decisions. We don’t need a politician’s approval. A senior woman in sales and trading once told me that she loves her job because trading stocks is a meritocracy. You either make money or lose money based on your own convictions. There is less room for office politics. If we do our homework and invest well, we can generate great returns. So, as women, who face greater obstacles to financial prosperity in the workplace, it is even more important for us to start investing as early as we can.

I hope I was able to empower you to start thinking about investing. Even if you start with a small amount, it could grow exponentially over time. Investing is an incredible tool for self-empowerment that can get you through many trials and tribulations over a lifetime.

I have heard every excuse in the book — I am not good at math, investing is like gambling, the markets are volatile and scary, I don’t have time, my boyfriend/husband takes care of this go talk to him, etc. … Wall Street has also developed a negative reputation since the financial crisis, which doesn’t help either.

To provide a simple example, if Mary had invested $5,000 in the S&P 500, a broad market index covering the entire US economy, in 2008 after the crash of the financial markets — today she would have well over $10,000. Granted, this was one of the biggest market rallies in US history, but still — my point is that investing is not that difficult. While the market was recovering over the last few years, so many average Americans generated very strong returns.

You are not guaranteed to make money of course though. It is important to make prudent decisions and seek professional counsel if you are unsure, especially as a beginner. You also will not become a millionaire overnight.

Below are some two basic investing concepts that you can apply right away to your bank accounts:

Compound Interest is Your Friend: When you invest, your money grows over time with compound interest. The magic of compound interest works over time — so the younger you are, the more you are likely to make over time by a large margin. Albert Einstein called compound interest the eighth wonder of the world. Here is an explanation: http://www.businessinsider.com/amazing-power-of-compound-interest-2014-7

Inflation is Your Enemy: Retail banks are clever — they take advantage of the fact that the general public has a minimal understanding of investing, so they offer extremely low rates and sometimes even nothing at all. If you are not sure what interest rate you are getting, you should ask your bank what rate they are offering you. For many women, their savings lie in cash in a savings account, yielding low or zero interest, eroding away due to inflation. (If you don’t know what inflation is, here’s an explanation: https://www.investopedia.com/ask/answers/156.asp) Inflation been in the news a lot lately because everyone is afraid it will rise a lot.

But if you just do a two minute google search for “high yield savings account” you would find hundreds of banks that offer more competitive interests rates up to 1.6–1.9%. Look for banks that are 100% insured by the Federal Deposit Insurance Corporation. There are so many options and its really very simple.

My next few articles will contain some tips about how to start investing, so please stay tuned.

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