Women and investing: A savvy guide to investing for your age group
Written by Lynda Calver on October 23, 2017.
In my previous post I looked at the reasons why women are put off by investing and hopefully managed to persuade some of you doubters that investment can be your friend rather than your foe. How you approach investment will change depending on your age and here I’d like to outline some points to consider, whatever age you happen to be.
• Age 20-35
In my experience, the biggest financial concerns of young women in this age bracket tend to be paying off student debt and saving up to get a foot on the property ladder. Both of these these can seem like monumental tasks when university fees are at their highest levels ever and still climbing, and while house prices are also rising in many parts of the world. I’m not a fan of debt, but student loans and mortgages fall into the good debt category as they constitute a sensible investment for the future. A university education will enhance earning capacity and a mortgage is an investment in a tangible asset which also gives you somewhere to live without lining the pockets of a landlord.
While retirement may seem eons away and it may seem like a step too far to add pension savings to the list of your monthly outgoings, you really should try and save...even if it is just a small amount each month. Compound interest is your best friend when it comes to generating a pension pot that will afford you the lifestyle you want when you stop working, and time is compound interest’s greatest ally. The sooner you can start, the better. Getting into a savings habit now will stand you in good stead throughout the rest of your working life. At the very least take advantage of any work pension scheme which matches your contributions – it’s essentially free money!
This is the time of life when you can afford to be a little riskier with your investment if you can stomach the potential losses, as you have more time to recoup these. Diversification is key though so you don’t risk losing everything. Talk through your options with a professional financial adviser.
• Age 35-50
At this stage of life many women will have managed to invest in a home and hopefully started to build up some healthy savings. While many yearn to be mortgage-free, with mortgage rates still low, it is often a wiser decision to keep the mortgage and free up money for investment. If your investments are outperforming the interest rate you pay on your mortgage then it doesn’t always make sense to divert funds to paying off a mortgage.
Where you put that investment is key. As we saw in my previous blog, cash is not king - regardless of what many women think, inflation eats it away! To get better growth over the long-term look to other investment options, but be canny about it. You don’t need to be have a huge amount of knowledge but do a little research into the world of multi-asset funds. These offer a mix-and-match approach to investing where all the hard work is done for you by an investment manager who will diversify across different asset classes (equities, bonds, property, and commodities) and geographical regions. The result is no-hassle balanced exposure for you.
• Age 50+
By now retirement is becoming increasingly difficult to ignore. It is this age group of women who often come to me in panic having neglected their financial planning in their 20s, 30s and 40s. Women have a tendency to sacrifice their own futures to fund a child’s education, or assist them with deposit on a house - but women really should be putting themselves first at this age. We are all different but, personally, if I had to make a choice between paying for my child’s university education or saving for retirement, I would opt for the latter. I would prefer to be self-sufficient in retirement rather than a burden on my child.
It is also not unusual for one of life’s curveballs to hit at this time of life – ill health and divorce being the main two – and these can often make a bad situation even worse. The head in the sand approach simply won’t do – it’s time to get to grips with a retirement plan even if there hasn’t been much of one to date. Sitting down with a professional to drill down into some concrete figures regarding how much you will need to survive when you retire is crucial. If there is going to be a shortfall, it’s best that it is flagged as early as possible to give you choices about how to cope with it – working longer, compromising on your retirement plans or downsizing.
This is not the time of life to take big risks – more than ever you need a diversified portfolio which won’t jeopardise your savings. Again, take some advice from an experienced financial adviser.
If you’d like some assistance, I’d be happy to give it. Why not make an appointment with me to clarify any questions raised by the above and let me set you on track for the retirement you deserve?