Investor Psychology

How to Be a Confident Investor

You don’t have to be an expert. Start with your employer’s retirement savings plan.

After I wrote a column about building financial confidence in young girls, I received a note from a reader telling me how she had tackled that challenge with adult women. “Some years ago,” wrote Margaretta Paduch, “I realized that the female executive directors of a number of nonprofits in which I was interested ran highly successful enterprises but hadn’t a clue about their own retirement finances.” So Paduch, a dedicated individual investor, launched a series of monthly lunches to introduce the women to investing.

A few months ago, she received an e-mail from one of the women, who was about to retire. “She said that she had been reviewing the investments in her organization’s pension plan with a broker,” wrote Paduch. “Not only were the investments among those we had reviewed, but she also understood everything the broker was saying.”

Research by consulting firm Kantar shows that women are comfortable with everyday financial transactions, such as banking and insurance, and even with longer-term borrowing, says Kantar’s Audrey Looker. “With mortgages, for example, women like the idea that they can talk to friends and neighbors who have mortgages and ask questions of a broker,” says Looker.

But when it comes to investing, their confidence sags. “Women say they wish they had had more college courses on how to make smart decisions about where to put their money,” says Looker. And because most money topics are still taboo among women, “they can’t bounce ideas off each other.”

It also appears that women may expect too much of themselves. “What we hear is that women think they have to be an expert to be meaningfully involved with their finances or even to work with an expert,” says Carey Shuffman, head of women’s segment strategy at UBS. “All they really need to do is be aware.”

As a result of this misconception, women are often reluctant to take the first step toward investing, which becomes a vicious cycle. “The longer you delay learning, the harder it is to dip a toe in,” says Looker.

Conquer your fears. So how do you take that first step? Start by using your spouse or partner as a sounding board (or a trusted friend if you’re single). Each of you brings financial instincts to your relationship, and together you can work as a team. When UBS surveyed women who were divorced or widowed about the financial challenges of being on their own, nearly 60% said they wished they had been more involved while they were married. In fact, more than half said they would have done fewer household chores to find more time for finances.

Make things easy on yourself by participating in employer-sponsored retirement accounts and other automatic investing plans and by using one-stop products such as target-date mutual funds. You can always branch out once you feel more confident and curious.

Take advantage of opportunities to educate yourself in a comfortable setting. “The workplace is a very successful arena in which to connect with women,” says Lorna Kapusta, Fidelity’s head of women and investing. Fidelity works with thousands of employers to sponsor lunchtime webcasts and seminars (plus similar events at Fidelity branch offices). The workshops create a “judgment-free zone,” says Kapusta. “When we get to the question-and-answer session, the floodgates open.”

When I was working on this column, my husband asked me what had helped me to feel comfortable as an investor. Quite truthfully, I said that it was years of reading Kiplinger’s. The magazine’s stories helped me settle on an investment strategy that works for me: a core of index funds spiced up with a few of our favorite actively managed funds.

How about you? How did you become a confident investor? I’ll be happy to share your experiences.

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