Investment myths are not harmless tales of times past.
No. They are the monsters lurking in the shadows of your mind, gobbling down your resolve to start investing and change your life.
Because of these investing myths, your nose is pressed against the window of the investing world, looking wistfully inside but never crossing the threshold.
You want to venture inside, but your belly twists, fearing that you will lose your money, and your mind whispers that investing is a man’s game. Numbers and figures swim in your vision, and you are confused by the investing jargon thrown at you.
You are not alone. A recent study by Wealthify found that 74% of the women surveyed are nervous about investing (compared to 58% of the men). Yet another study found that just 28% of women in the UK invest (compared to 45% of men).
What explains this gender investing gap?
Enter investment myths that women believe. Myths make entertaining stories, even when they scare us, but they are lousy life strategy companions.
Are you ready to roll up your sleeves and join me for some myth-busting?
You won’t regret it.
Investment Myths Women Believe Debunked
Here are the top ten investment myths that keep women within the perceived safety confines of saving.
#1. I’ll Lose my Money
The fear of losing money can stun even the boldest among us. A recent Hargreaves Lansdown report found that 42% of the women they approached didn’t invest because they feared losing money. The investment myth ‘I’ll lose my money if I invest’ is a narrative that has dissuaded countless women from stepping into the investing realm.
It’s a myth that pictures the stock market as a casino where the odds are always against you.
Here’s the truth—investing isn’t a blind gamble. It’s about making informed decisions where risk can be managed and minimised through diversification, research, and time. Yes, markets can fluctuate, and investments may go down and up, but historically, they increase in value over the long term. The S&P 500, for instance, has an average annual return of around 10% before inflation over the last century.
So, how do you bust this myth?
Start with education. Understanding different types of investments and how they work is the basis. Dive into resources—books, articles, and expert podcasts—and arm yourself with knowledge.
Next, consider your risk tolerance. Not everyone is comfortable diving into high-risk stocks, and that’s okay. There’s a spectrum of investment options, including mutual and index funds.
Remember, investing is a marathon, not a sprint. Regular, long-term investments in a diversified portfolio are a successful strategy for many investors.
So, let’s shift from fear to strategy and watch that myth crumble.
#2 It’s All Greek to Me
The phrase ‘It’s all Greek to me’ encapsulates the myth that the language of investing is so complex it might as well be ancient Greek.
This myth suggests that the doors to investment wisdom are closed unless you’re fluent in financial jargon. It feeds into the insecurity that one needs to be a Wall Street wolf or a numbers whiz to start understanding the stock market.
Busting this myth starts by demystifying the language of investment.
Yes, the financial world loves its acronyms and esoteric terms, but they’re not insurmountable. They serve as shorthand for concepts that, with a bit of patience and the proper guidance, can be decoded by anyone. Think of it as learning a new language.
The key to unlocking this cryptic world is education and access to information. Today, abundant resources are tailored to beginners, from investment apps that guide you through each step to online courses, forums, and articles that break the jargon into plain English.
Initiatives led by women in finance have created platforms that cater specifically to female investors, fostering a supportive community that speaks your language.
Moreover, digital wealth managers and user-friendly investment platforms have made it easier to start investing without understanding every intricacy. They translate the ‘Greek’ into actionable advice, allowing you to learn as you go.
Investing is no longer a locked book written in an arcane tongue. It’s a resource available to anyone with the curiosity to learn and the drive to grow their wealth.
#3. Investing is for Men
The myth that ‘Investing is for men’ is a stubborn relic of a bygone era, one that paints the picture of finance as a boys’ club where women’s presence is more a novelty than a norm.
It suggests that the investing world is a masculine domain, somehow unsuited to the feminine mind. This narrative is as outdated as the notion that women can’t handle leadership roles or complex problem-solving.
To bust this myth, one need only look at the evidence.
Research consistently shows that women are just as capable of investing and often outperform men. A study by Fidelity Investments found that female investors exceed males by 0.4% in returns annually. Why? It may be the propensity for thorough research, long-term planning, and lower overconfidence often exhibited by women.
The key to dismantling this stereotype lies in empowerment through education and representation. Financial literacy programs targeted at women are burgeoning, offering tools and knowledge to navigate investment confidently. Social media, too, plays a role, with female financial influencers demystifying the process and sharing success stories.
The investing landscape is changing. The myth that ‘Investing is for men’ loses its power with each woman who invests.
One day, it will be consigned to history, a fable of how things used to be, not how they are.
#4. I Don’t Have Enough Money to Invest
The myth ‘I don’t have enough money to invest’ conjures up the image of investing as an exclusive club where the price of admission is a hefty bank balance.
This persistent fallacy feeds the belief that investing is out of reach for the average person and that vast sums of money are required even to get started.
Let’s bust this myth with a dose of reality: the investing landscape has shifted dramatically.
Gone are the days when investing was the sole province of the well-heeled. The rise of micro-investing apps and platforms allows individuals to invest amounts as small as the change left over from their morning coffee purchases.
The emergence of fractional shares means you can own a piece of your favourite company without buying a whole share. You can start with what you have, no matter how small, and grow your investments over time.
In short, the entry barrier to investing isn’t high—it’s more of a step than a leap.
Investing is not just for the wealthy.
#5. I am Bad at Maths and Not Suited to Investing
The myth ‘I am bad at maths and not suited to investing’ is a common misconception that assumes a high level of numerical expertise is a prerequisite for successful investing. Let’s unravel this narrative.
At its core, investing isn’t about complex equations or advanced calculus; it’s about understanding basic principles and making informed decisions. The myth crumbles when you realize that today’s tools and resources can handle the numerical heavy lifting for you.
Digital Wealth Managers can calculate risk, returns, and diversification needs. Online calculators can project investment growth. None of these require you to be a maths whiz.
Moreover, the essence of intelligent investing lies in grasping concepts like compound interest, the importance of diversification, and the patience of long-term growth — all of which are qualitative ideas rather than quantitative puzzles. Emotional intelligence, discipline, and patience are as critical to investing as any mathematical formula.
We must shift the focus from number-crunching to financial education to bust this myth.
The narrative that you must be good at maths to invest is untrue. With many resources and a willingness to learn the basics, investing is open to anyone, numerically gifted or not.
#6. It is Safer to Look After the Pennies
The adage ‘look after the pennies, and the pounds will look after themselves’ underpins the myth that hoarding every penny and avoiding the risks of investing is the safest route to financial security.
This belief champions extreme frugality and squirrelling away money in low-risk, low-return havens like savings accounts, which means you lose money in an era when inflation is higher than the interest rates.
Busting this myth requires a shift in perspective from mere saving to intelligent investing.
To navigate past this myth, one must embrace the concept of inflation and understand ‘real return’ — the growth of your investments after inflation. Even conservative investments in a diversified portfolio of bonds, stocks, and other assets typically beat inflation over the long term.
By understanding the real inflation risk and using available investment tools, even those who start with small sums can see their financial security and prosperity blossom over time.
#7. I Don’t Know Enough About Investing
The myth ‘I don’t know enough about investing’ is rooted in the belief that finance is an exclusive club where only those with an encyclopaedic knowledge of the market can thrive.
This misconception can stop many potential investors, especially women who are not traditionally encouraged to learn about finance.
Busting this myth begins with dismantling the barriers to financial education.
The reality is that investing is not just for the experts; it’s for anyone willing to learn. The digital age has democratised financial knowledge, making it more accessible than ever. Teaching resources, from online courses and tutorials to podcasts and blogs, are free or at minimal cost. These tools are designed to help beginners take the first step, understand the basics, and gradually build their knowledge.
Becoming a successful investor doesn’t require a Ph.D. in economics; the basics can be learned with time and patience. Fundamental concepts like stocks, bonds, diversification, and risk management are the building blocks anyone can understand. Investment platforms and digital wealth managers offer guidance, helping beginners make informed decisions without knowing every intricacy of the financial markets.
The key is to start small and grow your knowledge as you grow your investments. Using educational resources and advisory tools, anyone can add ‘yet’ to ‘I don’t know enough about investing’.
The myth that you need to know everything before starting is simply that—a myth. Knowledge, like wealth, accumulates over time.
#8. Investing is Glorified Gambling
The myth that ‘Investing is glorified gambling’ equates the strategic planning and research of investing with the unpredictable risk-taking of a roulette bet.
This paints a picture of the stock market as a game of chance where luck outweighs logic, and financial ruin is a roll of the dice away.
Contrary to the gambler’s reliance on chance, an investor’s success hinges on informed decision-making. Investing is grounded in research, analysis, and historical data. While the future performance of investments cannot be predicted with absolute certainty, trends and patterns can be studied, and risk can be mitigated risk. Unlike gambling, where the house always has the edge, investing in the stock market has historically trended upwards, with well-chosen investments yielding substantial returns over the long term.
To bust this myth, one must understand the principle of due diligence. Responsible investors diversify their portfolios to spread risk across various asset classes, employ risk management techniques, and stay informed about market conditions. They have the patience to see their investments grow over decades.
The fundamental difference between investing and gambling lies in the approach: gambling is speculative and often driven by the desire for quick, substantial returns. Investing, meanwhile, is strategic and based on the expectation of steady appreciation. By recognizing this distinction, potential investors can shift their view from seeing investments as a risky bet to understanding them as calculated and strategic paths to long-term financial growth.
#9. I Need to Lock my Money Away
The myth ‘I need to lock my money away’ feeds into the fear that investing means relinquishing access to your funds for long periods, leaving you stranded in case of a financial emergency.
However, the reality of investing is far more flexible. While some investments, like retirement accounts or certain bonds, have stipulated terms before you can withdraw without penalty, the vast array of investment options available today ensures that locking your money away is not necessary.
Liquid investments, such as stocks, mutual and index funds, or exchange-traded funds (ETFs), can be bought and sold on public markets with relative ease. They offer both the potential for growth and the flexibility to access your funds when needed.
Understanding investment liquidity is the key to busting this myth. High-liquidity options allow you to sell your investment at market price almost anytime, whereas lower-liquidity investments might offer higher returns in exchange for more extended holding periods. It’s about balancing your portfolio to match your financial goals and liquidity needs.
Investors can strategically allocate their assets across different investments, ensuring some can be quickly converted into cash without significant loss. This balanced approach allows you to take advantage of the growth potential of the markets while maintaining access to a portion of your funds for emergencies or short-term needs, effectively debunking the myth that all investments require locking your money away.
#10. Investing is Too Time and Energy-Consuming
The myth that ‘Investing is too time and energy-consuming’ paints the picture of investment as a labyrinthine task reserved for those with endless hours to pore over financial statements and market analyses.
Busting this myth involves highlighting the modern investment landscape’s efficiency and accessibility.
Thanks to technological advancements, investing no longer requires a Herculean effort. Digital wealth managers, for example, automate the investment process by using algorithms to manage portfolios based on the investor’s risk tolerance and goals. This technology democratises investing, making it accessible for beginners and those with limited time, as it minimises the need for constant oversight.
Moreover, the advent of passive investment strategies, like index funds, offers a low-maintenance approach to investing. These funds mirror the performance of a market index and are known for their long-term growth potential, low fees, and minimal effort required from the investor. By investing in a diversified portfolio of index funds, individuals can participate in the market’s growth without the daily grind of stock picking and market timing.
Investing today is adaptable to various lifestyles and time commitments. By leveraging the right tools and strategies, anyone can create an investment portfolio that grows with minimal daily involvement, effectively debunking the myth that investing must consume your life to be successful.
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Let’s circle back to where we began, standing outside the intimidating and intriguing investing world. What keeps you out in the cold are the shadows of doubt cast by the top investment myths believed by women.
Here, we debunked these myths – from the belief that investing is a cryptic language understood only by the few to the misconception that the stock market is no place for a woman. We’ve shattered the illusion that investing requires a fortune or that it’s an all-consuming endeavour commandeering your every waking moment.
Understanding that these myths are just stories we can re-write is the first critical step to leaping into the investing world.
We often create our limitations by succumbing to outdated stereotypes and unfounded fears. Are you ready to overcome these limitations?
Make a list of the investing myths you share and follow the suggestions for busting them. Educate yourself, research investment options, select a platform and leap.
You can also open an ISA account with Vanguard and immediately invest in index funds. Alternatively, you may prefer to open a Nutmeg ISA. It’s your call!
OpenAI. (2024). ChatGPT [Large language model]. /g/g-2fkFE8rbu-dall-e