It's the best first step before you invest.
Let's start with the good news: Women are living longer than ever. "Some studies have even said that we outlive our male counterparts on average 14 years," says Jenine Garrelick, Senior Managing Director at MFS Investment Management. The bad news? It means we'll also face more out-of-pocket costs once we hit retirement. Throw in the gender wage gap, along with the fact that women typically take more time away from work to care for children and aging parents, and it's easy to understand why building a nest egg and making sure we've got a well-funded retirement account can feel like an uphill battle.
But here's a bright spot: According to now-famous research put out by Brad Barber and Terrance Odean at The University of California at Berkeley's Haas School of Business, women are stronger investors than men, routinely earning higher annual returns than their male counterparts.
MFS (the firm to thank for the invention of the mutual fund) works with financial advisors who help individuals achieve their long-term goals, and Redbook recently hosted a Facebook Live panel with Garrelick and other financial experts. The topic: Why there's no smarter time to start investing than the present. Whether you're a seasoned investor or aren't sure where to start, a competent financial advisor is your greatest ally. "A lot of people think of meeting with an advisor like going to the dentist, but it shouldn't feel that way!" says finance journalist Nicole Lapin, who was a part of the Time Is Now panel. Here are the most common questions about working with one, answered.
Women are stronger investors than men, routinely earning higher annual returns than their male counterparts.
Can't I do this myself?
According to Maureen Kerrigan, Senior Vice President and Financial Advisor with RBC Wealth Management, too many women are reactive-instead of proactive-with their financial planning.
"I think it has to do with many women not putting themselves first, ever," she says. "On the never-ending list of 'To Dos,' financial planning often comes after the demands of our many other roles."
For those who fall into this camp, Kerrigan says it's usually a financial emergency that inspires a change. It's similar to waiting until you're diagnosed with a disease before you start eating better and exercising. Of course, it's best to adopt healthy habits before disaster strikes. (It's easier to prevent a financial hiccup than course correct after the fact.) But going it alone can be an intimidating prospect, especially given that Americans seem to be worrying more than ever about their finances, according to a 2016 Gallup poll.
"I remind clients that they likely don't drill their own teeth or change the brake pads in their car; instead we seek out professionals to do what they specialize in," says Kerrigan, adding that the same is true of our finances. "If you're lacking confidence about the financial process, be sure to find an advisor willing to invest the time in you, so that not only will your investments grow, but your confidence in what the advisor is doing on your behalf will grow."
"A lot of people think of meeting with an advisor like going to the dentist. It shouldn't feel that way!"
How do I choose the right financial advisor?
We seek out recommendations for everything from doctors to hairstylists to gyms. Financial advisors are no different. The trick is finding someone who understands your individual challenges, which is vital for your financial health and to help you achieve your goals. Think of a financial advisor as a confidant you can get real with about your financial situation.
"The relationship with your advisor should be like that of a good friend; someone who understands you and isn't afraid to tell you the truth," says Kerrigan. "As you become more comfortable in the relationship, the confidence in the control you have of your financial future will be very empowering."
Just as you can't lie about your weight to a personal trainer, failing to be transparent with your advisor will only work against you. Open up about your financial health, sharing everything from your debts to insecurities to long-term goals. The second part of the equation is being receptive to their insights. (Remember, you guys are on the same team.)
"There will always be an advisor out there who'll tell you what you want to hear; not what's best for you," adds Kerrigan. "It's essential to find someone who first listens to you and gathers information about your dreams, needs and concerns. Then, as a team, you move forward together."
How should I start investing?
Once you've teamed up with a financial advisor who understands your desires and risk tolerance, the two of you can create a plan that meets your needs. The ultimate goal is to create a diversified investment portfolio that reflects your values and big-picture goals.
The operative word here is diversified. That means you need a mix of different types of investments so that all your eggs aren't in one basket. (For example, if you throw all your cash into individual stocks, you could lose big if they go down.) This is where the financial advisor can help guide you in the right direction.
Kerrigan advises nervous newbies to start small: "If your raise is $100 per month, save half in either a retirement account or an investment account for a future goal or a rainy day."
If you think you don't have room in your budget to start investing, take a look at your spending patterns. Is there any way to cut your discretionary spending by half and redirect that money toward your 401(k) or savings account? Kerrigan says it's all about finding trade-offs that feel doable. The payoff? Financial stability, which is something your future self will thank you for.
Redbook is partnering with MFS Investment Management to help women feel confident about reaching their long-term financial goals. For more about investing and working with a financial advisor, check out the first Time Is Now panel on our Facebook Live event.
You Might Also Like
