Ladies – you too can make a great investor!

8th March 2011 marks the 100th anniversary of the International Women’s Day. Here’s wishing all my fellow beautiful and amazing sisters a Happy Women’s Day! On this special day, take some time to celebrate our accomplishments and honor ourselves for being the beautiful, loving, smart and capable woman we all are.

Among the achievements that Singaporean women can be proud of is the rising financial literacy and awareness of the importance of personal finance management. A recent survey by MasterCard Worldwide Index of Financial Literacy found Singaporean women to rank highly in terms of basic money management and financial planning compared to their Asian Pacific peers, scoring 70 and 80.4 respectively (out of 100)

When it comes to basic money management, 71 per cent of the Singaporean women surveyed said that they do not have problems staying on top of their bills and credit commitments.
At the same time, nine in 10 believe they “should have three to six months of cash savings to meet their emergency needs, such as illness or job losses”.

However when it comes to investing, Singaporen women scored only 51.5 (out of 100) in investment skills and knowledge, below the average 56.7 in Asia Pacific region.

So why this disparity? Being educated and financially independent women who are perfectly capable of mastering their personal and even family finance and budgeting, why do many feel inadequate and not confident about their ability to make investing decision?

Women are perfectly capable of becoming savvy investors, if they choose to and take the necessary steps to do so. Here’s how..

 

 

 

 

It’s not about the APTITUDE, its the ATTITUDE

Here are 3 common challenges I often hear from women when it comes to investing

1) “Investing is too complicated, I’m not good with numbers and finance”

The world of investing can appear daunting for some women, with all its financial jardons and technicalities such as P/E ratio, index, valuation, asset classes etc.. As a result some women find it overwhelming and conclude that investing is too complicated and hard to understand. To add to this, the world of finance and investing often feature men as the financial experts, analysts, gurus etc, giving the social impression that men are better at investing. No wonder I hear so many women feeling that investing decisions are best left to the men in their life, be it their husband, boyfriend or father!

In reality, women can make savvy investors as well. In fact studies have shown that women make better investors, returning higher returns then men over the same investing period. Why is this so?

Women are more cautious in making investment decisions, possess much more patience and make great long term investors. Once women learn the right tools and strategies, they are more likely to follow it rather than trying to catch the next big thing or get carried away with their ego. I have personally seen many women who started with zero investing background end up faring better in their investments then men in their same class.

Investing and finance is like any other skill which can be learnt and mastered. There are plenty of resources including online websites and books designed to help women understand how to manage and invest their money e.g David Bach’s “Smart Women Finish Rich”, Kim Kiyosaki’s “Rich Women” and Suze Oman’s “Women and Money”. Women can also pick up investing concepts and strategies through playing games such as the Cashflow game and attending investing classes or talks.

2) I have no time!

This is a common challenge faced by many Singaporean women which is perfectly understandable, given the daily challenges of balancing work and family commitments. Having to take care of the family after a full day work can be tiring and doesn’t leave much time for herself, let alone time to learn about investing and monitor investments. 

Yet, investing is something that we cannot afford to completely ignored.

There is a saying in chinese, “There’s no ugly women, only lazy women”. Investing and taking care of your finances is just like beauty and taking care of your skin. Both requires consistent effort and it pays off in the long run.

The good news is there are ways to simplify the investing experience and even automate the process to work for you in the long run.

For the busy woman with no time to individually research and select stocks, unit trust is one tool which allows them to outsource the selection of stocks to professional fund managers and to leverage on the pool of investors’ funds to invest in a diversified basket of stocks. The investment can even be automated by setting up a regular investment program which buys into the funds of their choice on a monthly, quarterly or annual basis, without having to time the market. This is a strategy known as dollar cost averaging, which takes the emotions and hassle out of investing. It can be set up as an automatic growth engine working for you in the background over the long run, while you pursue your career and strive towards other life goals.

3) “Investing is too risky, I am a conservative person”

This is a common perception among women and this innate need for security and safety causes women to shy away from investing. To many, Investing = Risking my hard earned money and keeping the money in the bank seems to be the “safest” de-facto approach.

Yet do you know that your money sitting in the bank is also at risk, and it’s in fact a guaranteed risk of losing?

Inflation is the big 9 letter word that chips away at our money, whether we like it or not. With Singapore’s inflation rising to 3-4% this year, your $10,000 would have lost 3.9% just be sitting in a bank savings account at 0.1% interest! Risk is unavoidable when it comes to investing but at least we stand a chance for potential gain that can exceed, if not at least cover for inflation.

Moreover there are ways to manage the risk, e.g by spreading your eggs across different baskets a.k.a “diversification”, which balances the risk and volatility of your investment, and by having a proper investment management plan to limit the losses and locking in the profits. Having an investment management plan is a commonly overlooked yet powerful tool. Having pre-defined rules and knowing what actions to take when the market moves will give you greater confidence and certainty about the investment.

Women’s lack of ego make them more likely to follow these rules and admit mistakes when they are wrong. Just like women are more likely to ask for directions when they are physically lost, women are more likely then men to admit they do not know how to proceed and seek out advice accordingly. The risk adverse attitudes of women in fact make them prudent investors with potential to excel in the investing game!

Anyone, women or men can become great investors with the right attitude and skills.

By investing wisely, prudently and consistently over the long run, financial security and freedom is within reach! 

To Your Success and Happiness,

Yong Hui

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