According to RBC, within the next decade, women’s personal finance assets are expected to grow more than 70 per cent. Stemming from inheritance funds, career earnings and entrepreneurship, women are set to be trailblazers in the financial future of our country. By 2026, it is projected that women will control nearly 50 per cent of all financial wealth.
Historically, the numbers have not been so even. The gender wage gap is a constant battle women face throughout the entirety of their careers. According to Statistics Canada, women average 89 cents to every dollar men make. The reality is, women battle a gender wealth gap that hinders their capabilities in securing a successful financial future.
Women are also more likely to experience significant changes in career and life events which lead to early career plateaus. These setbacks are a result of the societal expectation to take time off work for domestic responsibilities, like caring for children and elderly parents. Even though women on average live five years longer, this gap in their careers has effects on their retirement funds as their contributions to the Canadian Pension Program are hindered.
Women are encouraged to build up their investment portfolios in efforts to close the gender wealth gap. Investing offers the opportunity to accumulate wealth and secure long-term financial security. While financial goals vary among individuals, it is important to recognize the distinct investment strategies women should employ.
Patience – a Virtue
Statistically, men trade 45 per cent more than female investors and studies show that women foster more patience in investing. Using this to their advantage, utilizing patience in investing will allow compounded interest to grow, providing the opportunity to reinvest dividends and capital gains as time goes on.
By getting a head start on your investments, you can begin contributing to your retirement fund and reduce the risk of potential early-career plateau. Looking ahead at the next five, ten or twenty years, female investors need to identify SMART goals; specific, attainable, relevant and time-bound.
Utilizing Patience to Get the Most Out of Your Investment
- Capital appreciation investments are an excellent investment decision for women early on in their careers. It allows them to bank on their investments as they grow over the course of their careers.
- Target-date funds allow you to prepare your portfolio for life’s great changes. Gradual rebalancing and reallocation shift your assets from riskier investments to more conservative ones.
Diversify to Multiply
Portfolio diversification is another key aspect of ensuring women’s investment success throughout their careers. Using asset allocation, you can blend stocks and other investments to achieve a sense of security, avoiding excessive reliance on a single market or sector.
Serving as a basket of assets, exchange-traded funds are a helpful resource in diversifying your portfolio, offering investment options such as stock commodities or bonds. Investments with higher returns such as real estate and equities are a great direction for women to take when investing as they offer long-term rewards and increased investment assortment. Diversifying your portfolio enables you to branch out your wealth while avoiding losses and increasing your chances of stable returns in the future.
Risk and Reward
Statistically speaking, female investors are more risk-averse than men. In the world of investing, a conservative approach is not always the most effective. By exercising caution, you jeopardize your long-term financial stability. When looking to reach your return goals, embracing risk is seen as an essential element.
While a well-diversified portfolio manages risks, it is important to analyze your risk profile. The risk profile represents the lower value between risk capacity – your financial ability to endure loss of capital – and your risk tolerance – the amount of loss you are prepared to handle. By examining your risk profile your investment planning becomes increasingly more efficient. Women experience different financial needs throughout the multiple stages of life, and these shifts cause changes to risk profiles. Frequent reassessment of risk capacities and tolerance will ensure your assets are invested effectively.
Whether you are at the beginning of your investment journey or want to learn more about productive financial choices for female investors, speak to an advisor at RaeLipskie. Let’s embark on a financial journey that optimizes your long-term success, contact us today!
