5 Ways Women Can Overcome Investing Disadvantages

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Women are investing now more than ever, according to Fidelity's 2021 Women and Investing Study. The study found 67% of women invest outside workplace retirement accounts―up from 44% in 2018. The data also shows that when women invest, they tend to do well and see returns that outperform investments made by men.

Despite these strides, only one-third of women see themselves as investors or feel sure of their ability to evaluate and choose investments, the study reports. On top of this self-reported lack of confidence, women contend with additional gender-related hurdles to investing for retirement and other goals, including the gender pay gap and higher average debt.

Women can work to overcome investing disadvantages by advocating for a higher salary, prioritizing financial literacy, saving money and more. Here are some tips on how women can overcome barriers and increase their investing potential now.

1. Look for Ways to Increase Your Income

Working women in the United States earned 30% less than men in the third quarter of 2020, according to the U.S. Census, and would have needed to work 42 extra days per year to make the same amount as men. With the gender pay gap present in nearly every occupation, women face systemic financial hurdles to finding the money to invest.

Asking your employer for a raise or bonus at work is one way to increase the amount of money you have to save and invest. If a raise isn't an option, seeking a higher-paying job can help you bridge the gap.

Before you apply and interview for a new position, however, research the average pay in your industry. Asking around among professionals in the field can help, as can resources like LinkedIn and Glassdoor. Be prepared to ask for the salary that your time and skills are worth. You can also increase your pay potential by pursuing in-demand online certifications in fields like social media and project management if they are relevant to your line of work.

2. Know Your Investing Options

One of the best ways to invest in your retirement is to use a tax-advantaged retirement account, such as a 401(k) or 403(b), if your workplace offers one. These employer-sponsored accounts allow you to invest a portion of your paycheck pretax, where it will continue to grow and compound tax-free until retirement.

If your workplace doesn't offer a retirement account, you can open a traditional individual retirement account (IRA) through a brokerage or a bank to invest with the same tax benefits. A Roth IRA is another good option for retirement savings, though the tax benefits differ.

If you max out your retirement account contributions or are otherwise interested in branching out into other investment opportunities, consider looking into some of these popular investment vehicles:

  • Individual stocks and bonds: Some 67% of women invest their savings in individual stocks and bonds, according to Fidelity. Selecting stocks individually can be time-consuming, but the benefit of buying individual assets is that you get to choose exactly where you invest. Keep in mind that stock investing can be risky, and it's only a good choice if you're already in a strong financial position. Bonds are generally less volatile than stocks, but returns are often lower.
  • Mutual funds or exchange-traded funds (ETFs): Mutual funds and ETFs are investment vehicles that consist of multiple assets, such as stocks and bonds. This helps mitigate your risk while still positioning your investments for growth. Fidelity data suggests that women who select diversified funds feel more confident in their retirement savings plan.
  • Real estate: There are multiple options for investing in real estate. You might buy a property and rent it out, or buy, fix and flip properties instead of being a landlord. As an alternative, a real estate investment trust (REIT) is a less risky way to invest in properties. REITs are like mutual funds for real estate: They allow investors to own a small share of an extensive portfolio of real estate assets.
  • Cryptocurrency: Cryptocurrency is a newer asset class that many investors see as having high potential. But because crypto is a highly volatile and unpredictable investment, it's generally advised that you keep crypto holdings to a small percentage of your overall investments and don't put any money into crypto that you can't afford to lose.

3. Make Investing Automatic

Only 42% of women are confident in their ability to meet long-term savings goals like saving for retirement, the Fidelity study found. Investing a portion of each paycheck you earn automatically―even if you have to start small—can help you meet your financial goals. Women who invest a portion of every paycheck consistently report feeling more confident that their savings will grow to reach their investing goal.

It's easy to make contributions to your workplace or individual retirement account automatically by signing up online. You can also set up automatic incremental contribution increases. That way, you'll continue to invest more as you earn more throughout your career.

Consider raising your contributions by a set percent, such as 1% per year. You can also increase the percentage of your income you invest each time you get a raise, if you find you're able to get by on your previous salary. The extra funds will increase your retirement nest egg.

4. Learn About Risk

Understanding and evaluating financial risk is a foundational concept for beginning investors. Evaluating your personal tolerance for risk alongside your short- and long-term financial goals can help you decide what investments make sense for you. While caution is essential for any investor, being overly risk-averse and investing too conservatively can mean seeing lower returns.

Experts recommend that you pick a more aggressive asset allocation when you're younger and have more time between you and your investing goals. Then you can gradually decrease your exposure to risk as you approach retirement.

For example, an investor early in their career might choose to invest 70% of their money in stocks and 30% in bonds to maximize growth, whereas an investor close to retirement might choose to invest primarily in bonds to minimize the potential for loss.

5. Pay Down Debt

Women hold two-thirds of the nation's student debt and carry an average of $31,276 each. Women also carry higher installment loan balances and credit card utilization rates, according to data from the Federal Reserve.

Carrying more debt can make it harder to find the funds to invest, as money you could be saving for the future is directed toward paying down your debts and interest.

It's a good idea to prioritize paying down debt before investing extra funds. But the earlier you start investing, the better—even if it's just a small portion of each paycheck. Plan to contribute at least enough to your retirement account to exhaust your employer's match, if they offer one. After that, balance your debt payoff strategy with your long-term investing strategy to win on both fronts.

Talk About Investing

Women have shown they can be successful investors, but their self-reported lack of confidence in their skill at selecting investments and planning for retirement can be a barrier. Starting conversations about investing and spending time learning about investment topics can help women bridge the gap.

On top of prioritizing education and dialogue, come up with a plan. A financial planner can help you evaluate your risk tolerance and long-term goals to come up with an individualized strategy for your investments. Knowing where your credit stands is another important part of your financial strategy. Experian's free credit monitoring provides information and alerts to help you stay on top of your finances and credit as you work to achieve your financial goals.

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