It’s that time of year we all think of as the “scary” season, and I’m not only talking about Halloween or the presidential election.
Uncertainty can feel a little scary, and it can be a factor when it comes to investing, for sure. But there are historical trends we look to that make us more comfortable with market risks, and in our opinion, can make not-investing a much scarier option.
1) Think saving is enough?
If you’re making $85K a year and putting 20% of your income in the bank, you’re losing out on $1.1 million or more, over the next 40 years.*
2) Too far into the future to think about?
Ok, if you’re making $85K a year, putting 20% in the bank, and wait 10 years to invest, you could be losing about $100 every day. For 10 years. That’s right: on average, $100 every day. If you had a hole in your purse that money was just falling out of, you’d get your purse fixed, right?*
3) Not investing because you want certainty?
If you save 10% of your income for retirement annually and put it in the bank, your chances of retiring well (i.e., 90% of your pre-retirement income) for your (a woman’s) expected lifespan is 0%. That’s certain.*
4) Not investing because you don’t need the money, because you’re with your bae?
You know a “man is not a plan,” right? If the Queen Bey herself can get cheated on (what were you thinking, Jay-Z?? I mean, seriously??), none of us are safe.
5) Not investing because your bae is doing it for both of you and he’s better at it?
Think again: women have actually been shown to be better investors than men. Just Google “women better investors than men” and see the research pop up. Also, 90% of women end up having to manage their money on their own at some point in their lives, so why wait til you’re surprised?
6) Think you need a more fulfilling career before you can be the boss of your money?
Well, the best career advice I can give you is to invest. Why? Are you able to take more career risks, start that new business, leave the job you hate, transition to a new career, or push your boss for the raise if you have more money to your name? Or less? Thought so.
7) Using time as an excuse?
“It takes a lot of time. I don’t have enough time,” is something I hear — well, all the time. I’m back to that losing-about-$100-a-day thing. Do you have enough time to save that $100 a day? Well, by stripping away a lot of the jargon at Ellevest, we give you back some of that time. It takes some women less than 30 minutes to put together a financial and investing plan with us — less time than an episode of Broad City.
8) Okay, this one isn’t an excuse, but we think it’s a great motivator: Want to be a great example for your daughter, niece, or anyone who may look up to you?
For years, I didn’t exercise. I wasn’t that big on the sweating thing. And then I realized that my kids were seeing me not exercising. And no matter how much I told them it’s important to exercise, I was showing them something different. Do you want your daughter to be financially unequal to the men around her? And to be unable to leave a bad relationship or a cruddy job because she doesn’t have enough money? It doesn’t matter what you tell her; it’s what you show her, by investing.
9) Want to start your own business? Own a home? Make that big splurge that you daydream about?
What are the chances of achieving them if you’re just dreaming about them? Pretty low. Research indicates that your chances increase if you just write your goals down. Then you can plan for and invest in them. At Ellevest, we build each personalized investment portfolio with a target of getting you to your goal, or better, in the significant majority of markets. That’s a lot better than dreaming.
10) Want to be financially equal with men?
They’re investing, and you’re not. Boom.
If you want to learn more about Ellevest’s investing methodology, check out our new White Paper series. So far, we’ve broken down the meaning of allll those acronyms and how we keep it real with our forecasts. We also announced our newest round of funding, which features Venus Williams among other bad-a$$ businesswomen. How's that for motivation?
We assume the bank savings account yields a 1% average annual cash return and has no account fees. For investing, we assume 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 40 year horizon. These results are determined using a Monte Carlo simulation — a forward looking, computer-based calculation in which we run portfolios through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amount shown or better. Results include the impact of fees, inflation, realized capital gains, and taxes on interest.
We compare the wealth outcomes for a woman who begins investing at age 30 with one who begins 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. The bank account assumes an average annual yield of 1% and a 17% 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 40 year horizon. These results are determined using a Monte Carlo simulation — a forward looking, computer-based calculation in which we run portfolios through hundreds of different economic scenarios to determine a range of possible outcomes. We divided the calculated cost of waiting 10 years to invest, $337,657, by 3,650 (the number of days in 10 years). The resulting cost per day is about $92.50.
This result assumes a 30 year old woman earning $85,000 and saving 10% in a bank account that yields a 1% average annual return with no account fees. We assume her income in retirement is 90% of her pre-retirement salary. The results were determined using a Monte Carlo simulation — a forward looking, computer-based calculation in which we run portfolios through hundreds of different economic scenarios to determine a range of possible outcomes. The resulting likelihood of achieving the desired retirement income was 0%.
The projections of various investment outcomes are 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.
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.
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.
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.