For some women, it appears the pandemic has had a silver lining: getting started with investing.
Roughly two in five (42%) current female investors took the plunge either in 2020 or 2021, according to a recent survey from social investing app eToro. And half of all women said they have become more interested in investing during the pandemic, separate research from Fidelity Investments shows.
“People had more time to learn what investing means,” said Callie Cox, U.S. analyst at eToro. “We were all talking about it … so this helped women feel more comfortable to step in and invest.”
Generally speaking, women were disproportionately impacted by job losses early in the pandemic, as well as by caregiving responsibilities and challenges finding child care that would allow them to return to work. The resulting financial hit to their household income may have translated into a bigger 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 women investors in the survey plan to hold their investments for six years or longer. Separately, 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 meeting your financial goals, it’s important to give thought to the bigger picture.
“You want to think about why you are investing,” said Haley Tolitsky, a certified financial planner at Cooke Capital in Wilmington, North Carolina. “Think about what your goals are and why you’re 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 (i.e., retirement). If you end up needing the money during a downturn in the market, you could have to sell your holdings at depressed prices or at a loss.
“The shorter your time frame, the more conservative you want to be,” Tolitsky said. “You probably don’t want to be 100% in equities if you’re investing for less than 10 years.”
In other words, it may make sense to put some of your money in bonds or other assets that are less volatile, she said. It’s also worth having a diversified portfolio instead of a heavy concentration in one place, such as a particular stock.
Your risk tolerance matters, as well. This generally is considered the length of time until you need the money as well as your ability to stomach volatility in the stock market.
“The S&P 500 index’s annualized return is about 8% to 9%, but that’s over a long time 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 cut back on risky assets.”