Investing is not something a lot of women seem to be interested in. The percentage of women in senior roles in venture capital firms is just 4.9% and less than 10% in private equity.
This is not the case only with top-level jobs in venture capital firms, but in the average American household too, men are mostly the money managers.
Though the reason behind this low participation is not very clear, whether it is lack of interest, lack of incentives or people think that women are not good with money in general?
One of the major reasons in common American households could be that men generally make money or more money for the family, so they prefer to manage it themselves.
This low participation, however, is ironic because empirically and anecdotally, women make better investment managers and portfolio managers than men. There is also research to support this.
Our guest today is one such rare woman in the top-level investment manager jobs. Nancy Tenglar is the Chief Investment Officer at Laffer Tengler Investments. She is responsible for active equity management research, portfolio management as well as leading wealth management services.
Nancy is also the author of The Women’s Guide to Successful Investing, and today, she is going to tell you why investing for women is so important and how to do it successfully.
Why Investing For Women is Important
While men dominate in the field of investing, Nancy believes that investing your money is more important if you’re a woman, no matter if you’re old, young, single, married, mom, working, or housewife.
There are multiple reasons why Nancy thinks so. First, women tend to live longer than men, thus having a good chance of being widowed.
It is also backed by statistics that the average age of a widow in the United States is 59, while the life expectancy for women is 81 years. Also, the average age of a first divorce for women is just 30.
It is a myth that women take all the money in a divorce because if you live in a community property state like California, a woman might very well get less if she is the high earner.
In the case of widows, even if you end up with all the money, it doesn’t matter if you don’t know what to do with all that money.
Because women are generally not close to their financial advisor since they’re not the money spouse, they might struggle with finances after their husband. And even the financial advisor might not have the best interest of the mourning widow.
All these points to the need for women to be financially aware, financially independent, and able to at least bear their own expenses at all times.
If you’re a non-working woman who depends on your husband to run your expenses, then investing becomes a whole lot more important to you.
Also, on the other hand, women have all the attributes to be great investors. They tend to do more research, they’re less competitive than men, and they make quick decisions.
According to research, it has been found that portfolios managed by women generate better long-term total returns than those managed by men.
How to Start Investing
So we discussed why investing for women is crucially important. But how do you actually go about it? What steps should a woman with no financial background take to start her investing journey?
Don’t Wait For an Event to Invest
Many people wait for an event to occur or the perfect timing to start investing. And many amateur investors do invest based on events that are happening.
You shouldn’t ideally invest or start investing based on events, especially when you’re investing for the long term.
Many people invested their money last year based on the presidential election’s results. Many people panic sold all their stocks in loss because of the covid crash. Both proved to be bad decisions.
If you’re someone who’ll invest only when a particular person is in the office, then just have a look at the data. The best returns the market has generated were all in divided governments.
However, the worst performance, but still positive, has been when the elections ended in a sweep. The blue sweep is worst and the Red sweep is second worst.
Nancy always recommends people to not invest their politics. We’ve had people sell their entire portfolio when President Obama was elected and people selling everything when President Trump was elected.
Yet, the market is still here, giving positive returns even after the economy being hit by one of the worst crises. Because no matter whose government, the market will find a way and make money.
Yes, it definitely makes sense to adjust your portfolio and reallocate funds to different sectors according to the policies of the new government, but don’t do it just because your favorite person was not elected.
When you invest in a company, you don’t do it because of a particular event. If you do, then stop. You do it because you see potential in the company’s future growth.
So a change in the company’s management should matter more to you, rather than a change in the government.
Don’t wait for anything to start investing. Because the sooner you begin, the more it will compound and the more returns you’ll make.
Also Read: The 9 Different Types of Stocks
Start With Safe Bets
When you start investing, there will be a lot of noise about extravagant returns like 50%, 100%, even 200% return. But once you read about the most successful investors, you’ll realize that even the best of them can’t generate consistent returns of upwards of 25%.
It’s possible to double or triple your investment once in a while. But consistently chasing this type of return will only make you broke.
So for newbie investors, it’s best, at least in the beginning, to stick to large-cap stocks. Meaning companies with huge economic moat, crazy cash, and established names in the market. Basically, companies that are not going anywhere anytime soon.
There are two large-cap strategies that Nancy recommends: Equity Income and Growth at a Reasonable Price.
Equity income is basically for those investors who want their investments to generate regular cash. In this strategy, your focus is on large-cap high-dividend paying stocks.
In the Growth at a Reasonable Price strategy also, you focus on value stocks but still own some high growth names. For example, finding value stocks in high-growth industries like software, chips, tech, etc.
It’s crucial to stick to large-cap because those are the companies you will be confident to hold even if they start going in the opposite direction.
For example, Apple, Microsoft and Google. These are the stocks where you know that even if they don’t develop the next cool technology, they have enough money to buy it. They won’t go out of business anytime soon.
Look For Companies Finding Great Solutions
There is a great strategy if you want to look for those hidden gem companies that give 100-200% returns while still playing somewhat safe.
Invest in companies that are developing innovative solutions to large-scale problems. Now, that doesn’t mean investing in Covid vaccine companies. Because while that is indeed a large-scale problem, it comes under the category of event-based investing.
So don’t invest in a company just because it is in the vaccine race. But do invest in companies that are finding great healthcare solutions.
For example, if a company is producing solutions for healthcare that keep people out of the hospital, then that’s an innovative solution to a large-scale problem. The company might be worth looking into.
These companies can also be classified into high-dividend and high-growth. For example, Abbvie and Johnson & Johnson are high-dividend while Regeneron and Amgen are high growth stocks.
You can own any combination of these companies and build a portfolio that gives high growth but also provides stability to you.