Hello SOTGC community,
“I’m afraid of losing any money,” is the most common answer I get when I ask a woman why she keeps all the money she has saved in a checking or “savings” account. Often she will add, “I’m conservative when it comes to money.”
If I had the power, I would ask the Federal Trade Commission to take action against any institution that advertises a savings account as “high yield” when the annual interest rate paid to the saver is less than one percent. It is like sending an indentured servant up the hill carrying a 300-pound weight. [This is sarcasm and since I work in the regulated industry of financial services, please do not take this comment literally.]
In all seriousness, the old days of putting your money into a savings account and watching it grow into a big chunk of change is over. Yes, time and compounding works magic, but when you are starting with an interest rate between zero and one percent, you can’t expect much. And if the interest rate paid to you is less than the rate of inflation, you are indeed that servant carrying the 300-pound weight up the hill. You will never get to your goal because you will be losing money over time due to inflation.
If you haven’t figured it out already, I’m an advocate of the stock market and I invest the vast majority of my savings in it. Those women with all their money sitting in their checking or savings accounts look at me like I’m some daredevil who jumps out of airplanes sipping a cosmo. They may think that, but ask my husband and he’ll tell you I’m one of the most risk averse, unadventurous women he has ever known. Even his own mother is more exciting! (But he loves me anyways.)
The very reason I invest my money in the stock market instead of leaving it in the equivalent of cash is because I am so risk averse. Based on my education and experience, I believe a woman who doesn’t invest is actually taking on more risk than I do. If that woman loses her job, she has nothing else that generates income for her. She must burn through her savings. If she counts on marrying a successful man, what if that prince never shows up? A few of my friends are waiting on proceeds of a life insurance policy or a large inheritance from their wealthy parents but I don’t think most readers fall in that camp.
History shows that over the long term, the stock market (as measured by a commonly-used index) beats the returns of corporate and government bonds, certificates of deposit (CDs), and cash. As an investment advisor and trading coach, I teach people how to use options to reduce risk when investing in the stock market. (To hear me discuss my investing strategy, please RSVP for this free tele-seminar on Thus June 18 called, “How to Generate Your Own Allowance to Last a Lifetime.”)
Don’t get me wrong, there are times in one’s life where having six months’ worth of living expenses in cash is prudent, but cash and nothing else is not a sound investment strategy. You will not grow your money.
Those of you who have read my chapter in Empower! Women’s Stories of Breakthrough, Discovery and Triumph or have listened to one of my presentations know how I started investing in the stock market with $1,600 in 1993 and became a millionaire by the time 2007 rolled around. Yes, my portfolio took a hit in 2008, but by staying in the market and continuing to regularly invest money from my paycheck, 2009 turned out to be the biggest wealth creation event in my lifetime. Stocks were on sale! It was an ice cream sundae for the frugal. What a fabulous opportunity to buy high quality, dividend-paying stocks at a discount.
I am so interested in learning why some women invest and others don’t that I’m interviewing women for a book I am writing. Will you help me in this quest? Are you a successful investor? Have you lost money through investing? Does the way a woman’s parents raise her have something to do with how she views risk vs. reward? Are you entrenched in fear and don’t know where to start? If you have a 401K and you contribute to it, how do you decide how much to contribute and how to allocate your money between funds? I also seek to understand why some women manage their own money and some pay professionals to manage it for them.
I will only list first names, ages and occupations in my book. Please contact me so I can hear your story. We’ll set up a 15-30 min chat by phone or video conference.