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Investing

A financial advisor's advice to women investors: 'You don't have to become an expert'

Kristin O'Keeffe Merrick weighs in on how women can gain enough confidence to start investing.

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It's not a secret that women generally lack confidence when planning for their long-term financial goals. 

A new survey conducted by Select and Dynata found that nearly half of women investors (41.80%) identify as beginners. On the other hand, only 26.80% of men call themselves beginner investors.

While the survey also found that less than 10% of women overall classify themselves as investing experts, Kristin O'Keeffe Merrick doesn't want women to worry — or shy away from investing altogether. O'Keeffe Merrick, a financial advisor at O'Keeffe Financial Partners, advises women not to let their experience level deter them from growing their wealth.

"You don't have to become an expert," she says. "Part of the biggest struggle that women face is they feel like they need to be an expert before they can start investing. A lot of women think, 'I must do all the research' before getting started. They get caught up [in the research] and it's overwhelming, and they abandon ship."

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Women investors, on average, outperform men

While women might not classify themselves as expert investors, they tend to see good results when they do choose to invest.

Fidelity's 2021 Women and Investing Study found that, on average, women saw positive returns on their investments, even outpacing men's portfolio performance. Fidelity's analysis looked at more than 5 million Fidelity customers' portfolios over the last 10 years and found that, on average, women outperformed their male counterparts by 40 basis points or 0.4%.

The earlier you start investing, the more time your money can grow in the market so your smartest move is to just get started. O'Keeffe Merrick offers some tips on how to gain confidence and start putting your money in the market:

1. Identify your fear

Women tend to be more risk averse than men, but "figuring out where that risk aversion comes from is an interesting way to crack this," O'Keeffe Merrick says.

How individuals manage their money can often be traced back to how they were taught about money from a young age. But even if you've got some baggage, you can still invest while being risk averse. There are different types of investments for varying levels of risk tolerance.

For example, more conservative investors can put their money in mutual funds or low-cost ETFs that offer automatic diversification and lower risk than choosing individual stocks.

In fact, many of the best robo-advisors will use ETFs to build investors' portfolios because of the low risk they carry. A robo-advisor can be an effective way to ease into investing since they customize a portfolio for you based on your risk tolerance, goals and timeline. They will rebalance your portfolio for you as needed so you can be hands-off knowing your investments are taken care of.

Ellevest is one robo-advisor that stands out for women specifically. Its platform algorithm considers important realities of women's lives, such as pay gaps, career breaks and longer life expectancy, so women can get a true sense of where they stand financially. For a monthly (or annual) fee, Ellevest also provides access to online workshops, email courses and video resources from its team of financial planners and career coaches. Read Select's full review of Ellevest to learn more.

Another popular robo-advisor option that doesn't require a membership fee is Betterment. There is no minimum balance required for Betterment Digital Investing, and the annual account fee is a low 0.25% of your fund balance. Read Select's full review of Betterment to learn more.

2. Talk to someone you trust

"There's something about the idea of actually putting their money at risk that really freaks women out," O'Keeffe Merrick says.

They may not realize it at the time, but women shy away from investing because they naturally tend to gravitate toward safer places for their cash; however, this comes at the expense of their own financial growth.

"Women are so much quicker to write a check to charity than to write a check to themselves," O'Keeffe Merrick adds as an example.

Someone guiding you on your investing journey can help allay any fear you may have. "The actual help doesn't have to be [from a] professional, just call someone who's done it before," O'Keeffe Merrick says.

Though speaking with a reputable fiduciary investment advisor is recommended to determine the best approach for your specific investment goals, O'Keeffe Merrick's point here is simple: You're more comfortable taking on something new with a friend or family member by your side.

Investors-to-be may feel less freaked out by the market once they talk it out with someone they know and trust who has taken the jump themselves.

3. Lean into your learning style

There are tons of educational resources out there, which can sometimes contribute to the feeling of being too overwhelmed to invest at all. A good way to feel more confident is to make business news something you consume every day — and consume it the way you best learn.

Start with easily digestible email newsletters to learn more about the day-to-day markets like CNBC's "Morning Squawk" or the new "CNBC Investing Club With Jim Cramer" for insight into Cramer's stock picks and investment advice. O'Keeffe Merrick recommends the "Axios Markets" newsletter and "Axios Closer," which focuses on business topics and trends.

If you're more likely to listen to something rather than read, opt for business news podcasts like NPR's Planet Money or Marketplace.

Select has a whole section devoted to all things investing. We regularly speak with experts on their advice for beginners who want to start growing their wealth, as well as offer research behind the best IRAs, Roth IRAs, robo-advisors, free stock trading platforms and investing apps. Plus, O'Keeffe Merrick answers readers' most pressing money questions once a month in her new advice column, Getting Your Money Right. Her first installment guides a reader on what to do with her stockpile of savings and her second installment talks about how to manage your fear of risk when investing.

Bottom line

Investing can certainly be intimidating but holding off won't help you in the long run. Women can gain more confidence by identifying their fears, finding a friend to support them and making business news a part of their everyday consumption.

Once you feel confident, make sure your benchmark financial goals are met: pay off high-interest debt, meet your employer's match for your 401(k) and save up for an emergency fund. After you can check those boxes, you're ready to put your money in the market.

Catch up on Select's in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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