An excerpt from the seminar “Investing in the Future: What Every Woman Needs to Know” by Gail Buckner, Senior Vice President of Putnam Mutual Funds.
Men think more about sex than money. Women think more about money than sex.
Those were the surprising results found by Money Magazine in its 1996 survey.
Why do men think more about sex than money? They can afford to. Women can’t.
They worry that they won’t be financially independent. Because they worry about risk, women tend to invest too much in highly conservative investments such as certificates of deposit, savings accounts and bonds. They instinctively favor those investments over riskier stock investments because they know how they work, and they are afraid to take risks that may cost them money.
But risk isn’t their biggest problem – inflation is. If it takes $50,000 a year to live today, it will take $70,000 in ten years, and $100,000 in twenty- five years. Women live longer than men do, so they’ll experience even higher living expenses as the years roll on. People age 85 and over are the fastest growing sector of the economy, and women make up the majority of those in that age group.
Because they live longer, women will need far greater retirement income than men, yet on average they receive 30% less in social security benefits. Their lower wages and time off from work to raise kids reduce their benefits. With lower earnings, they have less disposable income, and so they start saving for retirement later. And often they work at jobs that don’t provide large retirement benefits, or they don’t take advantage of retirement plans offered to them.
The best way to become financially independent is to save at least 10% of what you make for your future. Pay down debt, then begin investing money in a retirement plan, allocating the investment to stocks, not guaranteed income investments. Periodically, sit down and take stock of your progress. As your investments grow, so will your self-confidence and satisfaction with your financial well-being.
How can you avoid making mistakes when you are investing?
First of all, realize that the stock market is not as risky as the evening news makes it sound. Sure, there are lots of “Malox moments” as the market swings up and down. But time will smooth out the ups and downs. Don’t let the short-term market news derail your investment plans. If you know you are invested for the long-term, you can listen to the news calmly. Do you care if the stock market is down? Only if you are buying or selling. Otherwise, sit back and enjoy the ride, or better yet, turn off the news and enjoy a relaxing evening with your family or a good book.
Invest gradually, not all at once. In that way, you’ll avoid having to try to pick the exact right moment to invest your money. Put money in month after month, and it will take the worry out of making a mistake.
Diversify your investments. To be properly diversified, you should own at least ten stocks in different industries. An easy way to do this is to invest in a mutual fund, which is kind of a salad bowl of investments. The investment fund manager is at the investment salad bar, picking the most appealing investments, deciding what to buy, when to buy it, and when to sell.
Invest globally, not just in the United States. Two thirds of the companies in the world operate outside the United States, and the top-performing stock markets are generally foreign, not domestic.
Many women worry that the stock market won’t continue to go up. But what makes stock prices go up is more demand than supply. As people age, the demand for securities goes up, and so stock market growth will track the aging population. Don’t worry that the baby boomers will all retire and take their money out of the market. The baby boom generation will retire over a twenty- year period, and will live in retirement for thirty years, and even then won’t end up spending all their money. They’ll leave an inheritance to their baby boomlet children, who will be building retirement savings of their own.