Women & investing: Enhancing financial literacy to build confidence

A perspective from E*TRADE Securities 03/25/21
Enhancing financial literacy to build confidence

Accounting for half the total US population and controlling more than $10 trillion in financial assets, women are an undeniable economic and financial force.1,2 

That makes it all the more surprising that only about a quarter of females invest in the stock market.3 Unfortunately, this means women may not benefit from market growth at the same rate as men—a factor compounded by the reality that women tend to live longer. 

We sat down with Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management and frequent CNBC guest, for insight into women’s investing habits, tips to build investing confidence, and resources to expand investing knowledge.

Q: What unique challenges do women face when it comes to investing? 

Lisa: I think the biggest challenge for women lies in feeling like they have a sufficient amount of knowledge and confidence. Women tend to be disciplined, measured risk takers. When it comes to investing their money, they usually aren’t swinging for the fences—they’re focusing on real-life goals. These are characteristics that make great investors, but they can also cause a certain degree of hesitancy. 

Think about how society has tried to teach us the importance of investing in ourselves—be it education, physical health, or mental health. Our financial health is no different. It’s important to remind women they are worth the investment.

Think about how society has tried to teach us the importance of investing in ourselves—be it education, physical health, or mental health. Our financial health is no different.

Q: What advice do you have for women who want to expand their investing knowledge?

Lisa: In my opinion, there’s nothing better than experiential learning. What I mean by that is literally taking whatever savings you have available, say $50 a month, and investing it. You could even start by participating in your employer’s retirement plan or an employee savings program. Then, make it a point to frequently check in on your account. Take time to learn about what happened in the markets—and why—so you’re engaged.

Of course, it’s great to read the books, but in my experience, the way to gain confidence is by doing. There’s a performative aspect to it, similar to learning a sport. You can rehearse a golf swing all you want, but until you go out and hit a ball, you’re not going to develop that real-world muscle memory.

Q: What’s your approach to investing and building portfolios?  

We  have to be disciplined in our investing objectives, approach, and how we measure performance. 

Lisa: We  have to be disciplined in our investing objectives, approach, and how we measure performance. If you want to buy shares of xyz, know what your thesis is. You may say to yourself, “I think xyz is a good deal because it’s selling at this price, or it’s trading at this P/E ratio, or it was 50% more expensive two years ago.” In other words, know why you’re doing what you’re doing. Then let the data either prove or disprove it. And if the data isn’t supporting your thesis, reevaluate.

Q: The past 12 months have witnessed extraordinary volatility. How do you cut through the noise in times when we’re constantly shifting between big down days and big up days?

Lisa: It’s like driving through a snowstorm. You have to keep your eyes on the horizon. Is there snow on the road? Yes. Could there be black ice? Yes. But if you’re staring down every minute, you’re not going to get to your destination. 

I try to recognize that, at the end of the day, we’re all humans battling an emotional response to what’s happening in the markets. The way to beat getting buffeted between fear and greed is to have a disciplined approach. In the long run, if you can stick to your individual plan, you can often come out stronger than you were before.

Looking to take the next step in your investing journey? Here are a few ideas:

  • Expand your horizons: E*TRADE and Morgan Stanley have educational resources covering everything from the basics of diversification and asset allocation to advanced topics on analyzing stock performance, plus thought leadership and commentary on the latest market happenings.
  • Compare account types: Consider what type of account will help meet your financial needs. Are you investing for retirement? Do you want a professional to do the investing for you, or do you prefer to make the decisions?
  • Explore investment choices: There are plenty of choices when it comes to building portfolios. You can select individual stocks and bonds or use funds to invest in baskets of securities.
  • Take advantage of tools: Screeners can help narrow down your choices if you have analysis paralysis. Or browse funds by theme using thematic investing. If you’re feeling overwhelmed, prebuilt portfolios can help simplify the process based on how much (or how little) risk you want to take.

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  1. US Census Bureau, QuickFacts, accessed 3/12/21, https://www.census.gov/quickfacts/fact/table/US/SEX255219#SEX255219
  2. McKinsey & Company, “Women as the next wave of growth in US wealth management,” 7/29/20, https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management
  3. S&P Global, “The Financial Future is Female,” March 2019, https://www.spglobal.com/en/research-insights/featured/the-financial-future-is-female#northamerica

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