Statistically, women live longer than men but retire with 30 to 40% less money1 – which is why it is even more important for women to take on the mantle of investing their hard-earned money smartly. But investing can be intimidating – with the ever-growing investment choices available the confusion of picking the investment avenue that best suits you is justified. Then, there are the perceived complexities of investing, that often lead to women adopting the ostrich approach about getting started. But investing need not be complex if you partner with the right person who can break it all down for you, help you set financial goals and achieve a more secure future.
In an interview with Ninety One, Carol Axten, CEO of Wells Faber, provided five strategies to help you get started and own the narrative of your investment journey - it all begins with taking the first step.
Watch the interview:
1Take the first step to reap the benefits of compound interest
Investing is a long-term financial commitment and starting sooner rather than later is one of the best ways to yield solid returns on your investments. Investing does not need to involve saving large sums of money. Thanks to the power of compound interest, or the eighth wonder of the world as Albert Einstein termed it, you can earn money on your initial amount invested plus all the accumulated interest from previous periods. While everyone should be investing, each person has a different investment strategy that fits their personal and financial goals. So, whether you have a large sum of money to kick-start your investment journey or a small amount to contribute monthly, the most important aspect is to take that first step.
The sooner you start, the harder that compound interest will work for you. As the well-known saying goes, “the best time to start investing was yesterday; the second-best time is today.”
Figure 1: The power of starting early and compound interest
Compound interest can dramatically improve your investment outcomes. Figure 1 shows that by investing R1000 a month from birth to age 65, Suzy’s investment – growing at 10% per annum – amounts to a staggering R78.2 million (from a total contribution of R780 000). Karen, who also invests R1000 a month, only starts investing from the age of 21. Her investment also grows by 10% per annum, but she ends up with significantly less at retirement age, netting only R9.5 million (from a total contribution of R528 000).
2Find the right partner
Hiring a professional to take care of your finances can be extremely beneficial in the long run as financial advisors assess your financial goals, investment time-frame and tolerance for risk and monitor this over time. Like a coach, they provide guidance in times of market downturns and personal financial stress, ensuring that your plan is tailored for your changing needs and circumstances. Partnering with an expert helps you navigate market volatility and guide you through the complexities of investing. Advisors understand the need for detached analysis in the face of market turbulence and can help by creating a portfolio designed to weather all market conditions.
3Have a plan
As the adage goes, “a goal without a plan is just a wish,” a financial plan defines the goal and creates a strategy to achieve it. A well-constructed, personalised financial plan should include savings, budget, insurance, and tax strategies that help you reach your goals, stay committed, and more importantly, provide you with a sense of security and peace of mind.
4Stay the course
Emotional reactions to market fluctuations can make it difficult to stay focused and make rational decisions. Allowing emotions such as greed and fear to drive short-term investment decisions could, for example, lead to selling low and buying high, classic mistakes that can cost you dearly. It is especially difficult not to become emotional during periods of market extremes, so understanding market cycles can go a long way towards helping you stay the course. As difficult as it is to do nothing in market downturns, it may just be the best investment strategy.
5Be a pilot and not a passenger
You have the power to take control of your finances and become the pilot in your investment journey. By taking the first step, getting started and partnering with a financial advisor you can control the narrative of your financial journey, make sure your money works for you and be on the path to a more secure financial future.
1 Source: World Economic-Forum.
