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For some women, it seems that the pandemic has had a positive side: starting to invest.
According to a recent survey by social investing app eToro, around 2 in 5 (42%) current female investors took the plunge in 2020 or 2021. And half of all women said they had become more interested to invest during the pandemic, according to a separate study by Fidelity Investments.
“People have had more time to learn what it means to invest,” said Callie Cox, US analyst at eToro. “We were all talking about it…so it helped women feel more comfortable stepping in and investing.”
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Overall, women were disproportionately affected by job losses early in the pandemic, as well as caregiving responsibilities and difficulties in finding childcare that would allow them to return to work. The resulting financial impact on their household income may have resulted in an increased need to focus more on money matters, Cox said.
“They were in a corner and kind of had to take control of their finances,” Cox said.
Exactly half (50%) of female investors in the survey plan to hold their investments for six years or more. In addition, 67% of women are now investing outside of their retirement savings, up from 44% in 2018, according to Fidelity.
While investing can play an important role in achieving your financial goals, it’s important to think about the bigger picture.
“You want to think about why you’re investing,” said Haley Tolitsky, certified financial planner at Cooke Capital in Wilmington, North Carolina. “Think about your goals and why you are putting your money where you are.”
Investing in stocks or other volatile assets for short-term goals can be a riskier proposition than when you won’t need the money for decades (eg retirement). If you end up needing cash during a market downturn, you may have to sell your holdings at depressed prices or at a loss.
“The shorter your timeframe, the more conservative you want to be,” Tolitsky said. “You probably don’t want to be 100% in stocks if you’re investing for less than 10 years.”
In other words, it may be a good idea to put some of your money in bonds or other less volatile assets, she said. It’s also worth having a diversified portfolio instead of being heavily concentrated in one place, like a particular stock.
Your risk tolerance also matters. This is generally considered the length of time until you need the money as well as your ability to withstand stock market volatility.
“The annualized return of the S&P 500 index is around 8% to 9%, but that’s over a long-term horizon, not a few years,” Tolitsky said. “In the meantime, ask yourself if you can sleep at night knowing your money is fluctuating. If the answer is no, you probably need to reduce your risky assets.”