The Biggest Investing Mistake Women Make

By Sallie Krawcheck

There are a lot of articles out there about mistakes investors make. They typically include overtrading, panicking in down markets, falling in love with winners. Those are the biggest mistakes that men typically make. The biggest investing mistakes we women make, it’s basically one mistake. We don’t invest as much as the guys, and it can cost us a fortune over our lives. But why?

Reason number one: I hear, “We believe the stock market’s too risky.” But without risk, there’s no opportunity for investment return. That said, historically, since the 1920s, the stock market has returned 9.7% annually, even with ups and downs. It’s a lot more than you get by leaving your money in the bank. And, by the way, investing is not just investing in the stock market. At Ellevest, we recommend investing in a diversified investment portfolio, not just stocks only.

Reason number two: Women tell me we think we have to know everything before we invest. Nope. We don’t. Thinking that we do is very expensive.

Reason number three: We’re busy, so we wait. We wait because we think the market is too high. We wait because we think it’ll take a lot of time. We wait because we have a lot of stuff going on. The longer we wait, the more it can cost us. Wait a decade, which is not unusual, we estimate that if you're making $85,000 a year and wait a decade to invest, historically, that could have cost you $100 a day.*

Reason number four: We let our partner hold the reins. I did that ... and now he’s my ex-partner. If your partner is a guy, know that he’s not a better investor than you are. Research shows that women are actually better at investing.

Remember, a goal that you're not actively investing for is just a dream.

Source Ellevest. To calculate “$100,” we compared the wealth outcomes for a woman who begins investing at age 30 with one who began investing at age 40 after having saved in a bank for 10 years. Both women begin with an $85,000 salary at age 30 and all salaries were projected using a women-specific salary curve from Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc., which includes the impact of inflation. We assume savings of 20% of salary each year. The bank savings account assumes an average annual yield of 1% and a 22% tax rate on the interest earned, with no account fees. The investment account assumes an investment with Ellevest using a low-cost diversified portfolio of ETFs beginning at 91% equity and gradually becoming more conservative during the last 20 years, settling at 56% equity by the end of the 50-year horizon. These results are determined using a Monte Carlo simulation—a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest fees, inflation, and taxes on interest, dividends, and realized capital gains. We divided the calculated cost of waiting 10 years to invest, $341,181, by 3,650 (the number of days in 10 years). The resulting cost per day is about $93.47.

The results presented are hypothetical, and do not reflect actual investment results, the performance of any Ellevest product, or any account of any Ellevest client, which may vary materially from the results portrayed for various reasons.


© 2018 Ellevest, Inc. All Rights Reserved.

The results presented are hypothetical, and do not reflect actual investment results, the performance of any Ellevest product, or any account of any Ellevest client, which may vary materially from the results portrayed for various reasons. The results presented are not for any specific product and do not take into account specific product fees. Financial forecasts, rates of return, risk, inflation, and other assumptions have been used as the basis for the results presented.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Forecasts or projections of investment outcomes are estimates only, based upon numerous assumptions about future capital markets returns and economic factors. As estimates, they are imprecise and hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

Information was obtained from third party sources, which we believe to be reliable but not guaranteed for accuracy or completeness.

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Sallie Krawcheck

Sallie Krawcheck is the Co-Founder & CEO of Ellevest. Her life’s mission is to help women to reach their financial and professional goals.