I want to get started with investing but I have no idea where to begin. I need to learn more, but I don’t want to feel talked down to, simply because I’m a woman. I want to be educated by someone who understands me, and isn’t dismissive. I’m not certain I make enough money to consult a financial advisor. Where do I even begin?
Part 1 – Investing 101
Thank you for asking about this critically important issue. A 2015 report by Strategy Marketing.ca called “Financial advisors are failing women: what female clients really want and how to change the dialogue”, completely echoes your experience. It found that ‘87% of women looking for an advisor can’t find one they can connect with.’
This is a shocking statistic.
More and more women just like you aren’t prepared to accept this anymore. I applaud you for honouring your feelings and wanting better service! This is how we change society to inclusively meet the needs of everyone.
This subject is really two topics in one.
First, I hear a sincere desire to learn about investing in a down to earth manner.
Second is what to do once you are ready to take action. How does one begin investing, and in particular, find a great advisor?
As both topics are equally important, this question will be addressed in two articles. In this article we’ll get you investor-ready, and in part two, we’ll explore what you need to become advisor-ready, should you choose to go ahead.
You are in the driver’s seat
Suze Orman, a famous American financial advisor and educator once said; “No one will take better care of your money than you.” It may be the best piece of financial advice you’ll ever hear.
I know this is going to feel counter-intuitive, but the first thing you need to do is separate advice from education.
An advisor or any financial professional works for you. Just like a nutritionist, lawyer, or even a car mechanic, as a specialist, they play the role of trusted consultant. They provide their expert opinion to inform the decisions of the person who hired them, you!
Without a solid base in education, how will you be able to discern good quality advice from poor? We’ve all had the upsetting experience of being taken for a ride by someone who took advantage of our lack of knowledge and blind trust.
The opposite of feeling intimidated or dismissed is embracing responsibility for actively directing your financial relationships and results. That starts with education – both investment concepts and how the world of advice works.
While that might feel overwhelming right now, there are plenty of women-friendly resources to help you develop that confidence over time. Let’s start with the basics right now.
Guiding Light Principles
Here are five guiding principles you can always come home to, whether you’re just starting out, or pumping out the gains – and then, I’d suggest they’re even more important!
1) Never invest in something (or someone) you don’t understand. This simple rule comes from billionaire Warren Buffett, considered the world’s greatest investor. If you can’t explain it to a 5 year old, you don’t understand it enough to invest in it.
I’d also add that as a woman, your gut is queen. If you get that topsy turny feeling inside, honour it as a no, or at least a not yet.
2) Approach investing with a long-term objective. This reduces the likelihood of reacting from a place of fear or greed, provides peace of mind, and positions you to meet your goals based on sound strategy, not hope or luck.
3) Don’t put all of your eggs in one basket. It’s always good to have options, and to sleep well at night.
4) Good investing is slow, simple, and often boring. It is not hype, complicated, or expensive. It’s definitely not chasing money. There are a plethora of investment products out there, some of which are extremely complex and risky. It is completely unnecessary to invest in these!
5) You don’t have to study the intricacies of the economy, follow the stock market, or be a math genius to invest well. You only need to be willing to understand a few concepts and apply them over the long term. Isn’t that a relief?!
The Investing 101 Checklist
Now that you’ve got the big picture, let’s zoom in. Listed below are the concepts you should aim to feel comfortable with before you begin investing. Take your time working through them – they’ll likely be a lot of new terms to digest, and some will be more challenging than others. Remember principle #2, our long-term approach to investing? It applies to learning, too.
I’ve also put together an “Investing 101” resource which includes simple explanations of common investing terms. This chart should only be considered as a reference base for you to continue learning. Check out the Resources section for some great places to do just that.
-Compounding (how money grows itself!)
-Risk vs. reward (safety vs. gain)
-Volatility (fluctuation of asset values)
-Risk tolerance (conservative, balanced, growth, aggressive)
-Returns, interest, gains, dividends (your reward)
-Diversification and asset allocation (spread those eggs)
-Different investment classes (cash products, bonds, and stocks)
-Individual stocks vs. funds
-Mutual funds vs. exchange traded funds
-Passive investing (index investing) vs. active investing
-Fees on investment products (extremely important to understand!)
-Types of accounts where you hold investments (for example retirement vs. non tax-advantaged) and how you are taxed in each
We learn in a variety of ways, so here are some great places to start.
The stnce recommendations hub is chock full of helpful resources for women by women. Check out the podcasts, books, and videos here.
In particular, Canada’s very own Jessica Moorhouse’ “Mo’ money” podcast is sure to entertain and educate. While it’s geared towards millennials, everyone can benefit from the down to earth explanations. Start with this episode on investing basics.
While podcasts are free, books may provide more in-depth explanations. Although there’s a small cost, spending $20 on your education before you commit thousands more might just be the smartest investment of all.
Another option is the Ontario Securities Commission’s public education program Get smarter about money. It’s beginner-friendly and geared towards information and protection. Check it out here.
Here’s one caveat to be mindful of; most investing concepts are universal with the exception of type of accounts (for example the RRSP) and tax rules. These vary country to country, so it’s important to seek out Canadian resources on these subjects.
Our society has not done a great job of teaching financial education in general, and specifically, reaching women. Fortunately, things are really changing today. Learning about investing can be entertaining, inclusive, and down to earth. From books, podcasts, videos, and articles such as this one, women are becoming a force for our own financial change. There’s never been a better time to start.
The views and opinions expressed in this column are those of the contributor and do not necessarily reflect those of Equitable Bank. Any information provided is for information purposes only and Equitable Bank makes no representations as to the validity, accuracy, completeness or suitability of any content. You should seek the advice of a qualified professional or undertake your own research before making financial decisions.