In this week’s blog I am talking with the ladies. Guys join in as this is about your sisters, daughters, wives, etc. And you BEST care!

Ladies, I have a serious question. Why are you allowing men to add more money to their investment accounts and gain PROFIT on their investments while you sit passively on the sidelines? I am referring to men and women with equivalent income.

Research shows the average single woman’s net worth is three times smaller than the average single male. So, a single woman who has saved and accumulated a net worth of $300,000 sits back and watches her educational and income peer, who happens to be a man, accumulate a net worth of ~$900,000. The above example shows you the net worth and investment gap between men and women, with EQUIVALENT INCOME, is adding up to HUNDREDS OF THOUSANDS AND MILLIONS OF DOLLARS over the course of a lifetime. What is going on?

Fifty-seven percent of women did not invest $1.00 in 2017 in the market! We can change this!

Why do I care, after all I am a man? Because I have a daughter and niece that I love very much; I have a wife, an ex-wife who is a good friend (Don’t ask- long story) and many smart, talented, female friends.

Ladies if you allow this gap in net worth to continue growing, you jeopardize your ability to retire at an age where you still have your health; or take that round the world trip; or help your children with education and other costs. Lets not just have a bucket list. Lets check off every single dream on your bucket list! That is the power of good investing!

FIVE ACTIONS TO CLOSE THAT NETWORTH GAP

1. CHECK YOUR 401-K HOLDINGS AND CONTRIBUTION RATE
Many companies today sign new employees up for the 401, at an average rate of savings of 3% of your salary. So if you make $100,000 you are contributing $3,000 per year. And well off the maximum allowed contribution of $18,500 if you are less than 50 years of age. Once you reach 50 years of age you can contribute $24,500.

ACTIONS:

A. Go on line and check your percentage contribution. Increase it as HIGH as you can afford today. {Come on – YOU CAN DO A LITTLE BIT MORE-GIVE YOURSELF MORE!)

B. I want you to draft YOUR plan how you will achieve the maximum contribution level and the TARGETED YEAR, to achieve the maximum allowed.

C. The typical 401-K plan is laden with expensive, actively managed Mutual Funds. The majority of these actively managed funds underperform the market. Selecting these funds directly impacts your returns and reduces your net worth! Review the mutual funds or company stock you selected. Let’s reduce fees and try to improve returns. To reduce fees look for ETF’s versus Mutual Funds. I like the S&P 500 ETF or equivalent. Many 401-K Plans have this investment option. If you desire international exposure, which is typically recommended, identify an equivalent Global S&P 500 ETF fund. Finally you may want bond exposure. Again look for bond ETF’s with past 5-10 year good returns.

2. AFTER REACHING MAXIMUM 401-K CONTRIBUTION RATE – START INVESTING IN EQUITIES WITH A BROKERAGE ACCOUNT

If you do not have a discount brokerage account, read last week’s blog, “It’s TIME TO INVEST IN EQUITY – S&P 500 ETF INDEX” Click below link:

IT’S TIME TO INVEST IN EQUITY – S AND P 500 ETF INDEX

3. BETTER UNDERSTAND THE POWER OF COMPOUND INTEREST

There is no better financial feeling than looking at your year end investment returns (Non-retirement and Retirement accounts) and seeing your returns/gains match or exceed your annual compensation. How do some people achieve this? The power of Compound Interest Return! Compounding refers to generating earnings from previous earnings. See previous blog post: The Magic of Compound Interest

The Magic of Compound Interest

4. UNDERSTAND EQUITIES RISK

If you have never purchased a mutual fund or share of stock it can be intimidating. Let’s look at exactly what a share of stock represents. When you purchase a share of stock, you are simply purchasing a VERY small portion of that company. There are ~5.3 Billion shares of Apple stock. If I wanted to take over the company, I need to buy the 5.3 Billion shares at a cost of almost $1 Trillion. Afraid that exceeds my capabilities! But when you buy 1,000 shares of Apple stock you now own a small portion of the company. Congratulations, you are now a shareholder of Apple.

For the sake of this blog, lets assume you are buying because you believe the iPhone XI (next edition of the iphone believed to be released in late 3rd quarter or 4tg quarter 2018) is going to knock the socks off the MILLIONS OF IPHONE AND APPLE FANS, and they will line up at the stores three nights before the release (And no, I do not understand sleeping on concrete to buy a Smartphone!) So, you believe Apple shares are going to soar. But the reality, Apple shares can do three things. 1. NOTHING -Stay flat and unchanged. 2. Go up and make you a profit. 3. Go down and you lose money. To understand the risk of buying a share of Apple or a share of the Vanguard S&P 500 ETF, lets look at historical stock market performance risk factors.

RISK FACTORS (THIS THINGS HAPPEN – DO NOT PANIC!)

• The market will decline two percent or more about five times per year. With today’s validity I believe slightly more than five times per year.
• About every five to seven years, the market will decline 30+% {And yes we are overdue.}
• Markets increase typically three out of four years
• Over long periods (years) stock markets beat inflation, unlike bank savings accounts
• You will never become wealthy, selling at the low point and reentering the market at the high point. Which is exactly what your instincts say to do. Suddenly (after a few days) the market is down 12%. Your $200,000 you held yesterday is now worth $176,000. It took you years to accumulate the $200,000. Your instinct screams sell and you do to protect the remaining balance. Two questions you now have to answer: 1. Do you re-enter the market or buy that expensive car your brother-in-law has? 2. If you decide to re-enter, when? Majority of people who sell their equities, sit on the sidelines as the market slowly comes back. People finally re-enter when the market has gone up. You re-enter the market with your $176,000. You missed 30% of the recovery.
You will never become wealthy, selling low and buying high.
• DO NOT make important decisions based on emotions and fear (life lesson)!
• The best time to buy any product, is when the product goes on sale. Everyone likes a great deal. But we tend to shun equities when the price is steadily decreasing. If you have done your homework and this is a good Fund/ETF/Stock, you should be happy to buy when the price is lower.
You must understand the risk of the price going up and down when you buy any equity or for that matter any investment.

5. JUST GET IT STARTED – YOUR STRATEGY TO CATCH AND PASS THE GUYS!

A. Go on line and review your 401-K plan. Increase your contribution plan if you can afford it. Draft a strategy to achieve the maximum contribution annually, $18,500 or $24,500. Review your investment choices and select the level of risk based on your age and risk tolerance. Many of the 401-K brokerage accounts have systems to help you select your level of risk.
B. Open an Equity Brokerage Account
C. Make a deposit
D. Set up automatic deposits
E. Buy equity funds

CONCLUSION

Last weekend I saw the movie “Battles of the Sexes” – Bobbie Riggs and Billy Jean King played a tennis match 44 years ago. Bobbie was a 55 year old, washed up, former #1 ranked professional tennis player, screaming to anyone who would listen he could beat any professional woman tennis player. And for a time he was right. Until he met Billy Jean King, who trained hard, prepared and believed in herself. And she whipped him in three straight sets!

Ladies, I do not know all the reasons you invest less than your male peers. But just like Billy Jean King, get REAADY (Preparation through more education) AIM {Set up and fund your brokerage account) FIRE (INVEST & BELIEVE IN YOURSELF)!

DISCLAIMER

I am an investment and finance blogger. I am a successful investor in equities and real estate and happy to share my personal finance and investment lessons learned with you. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog, as recommendations for your personal situation. For individual finance advice please seek your own licensed CPA or financial advisors.