Thinking about investing in the stock market can feel daunting. But not all stock market investing is the same, and you don’t always have to do it alone. There are ways you can start investing in the stock market while building your financial confidence. And this financial confidence is crucial for women. Here’s why.
Why Investing Confidence is Important for Women
According to one statistic, 80% of women will live alone at some point in their life. That means that 80% of women will need to take control of their finances at some point in their lives. Part of taking control of your finances is investing (albeit not all investing has to be in the stock market).
There are some estimates that upwards of 70% of women leave their financial advisor after becoming widowed. These women are now either on their own or will need to find a new professional to work with. Why not take control of your investing now and start to work on building your systems, investing confidence, and relationships with financial professionals instead of waiting for high stress and emotional situations?
It is inevitable that at some point in their lives, women will be called up to make investing decisions. These decisions will be much easier with some investing confidence. So if you’re ready to build your investing confidence, here are 3 ways to start investing in the stock market.
3 Ways to Start Investing In The Stock Market
Most investing falls into one of 3 main categories. And although there can be nuisances within the categories, the overarching characteristics are the same. Here are 3 ways to start investing in the stock market.
DIY, also known as do-it-yourself investing, is when you are in charge of taking all the actions and making all the decisions.
At first, DIY investing can seem overwhelming (scary, daunting, insert your own synonym here), but it doesn’t have to be.
I delayed DIY investing because it seemed too complex. Now that I somewhat understand what I’m doing (I’m by no means an expert and am learning more all the time), it is getting easier.
One of the main benefits of DIY investing is the lower fees than with the other options. But with lower fees comes more responsibility on your part as the investor.
|Lower fees||No guidance – you are solely responsible for your decisions|
|You are in complete control of your decisions||You are in total control of your decisions|
|Lots of information available to help you feel confident||More education required to start|
DIY investing may be for you if you are ready to take complete control of your finances, want to invest for the long term, and have some basic knowledge of what you would like to purchase (I invest in broad-based ETFs).
This post may contain affiliate links which means I may receive a commission if you purchase through my links. Please read my disclaimer for more information. The information in this post is for entertainment purposes only and is not to be considered investment advice.
If you’ve decided to try DIY investing, here are some action steps for you:
- Do some research around DIY investing strategies, funds, and terms
- Start with a small amount until you become more comfortable
- Use a discount brokerage to help save on fees (I recommend Questrade, which entitles you to a free membership with Passiv – a program to help you automatically rebalance your portfolio)
Robo-advisors rely on algorithms and computer programs to manage your portfolio for you. Because these portfolios are not actively managed, they typically come with a lower management fee than working directly with a live person. But robo-advisors have slightly higher fees than DIY investing.
Using a robo-advisor can be a great way to get started investing in the stock market. Often you will have to fill out Know Your Client type questions, and the computer will select an asset allocation that meets your risk tolerance.
Then all you have to do is put money into your robo-advisor account, and the computer takes care of rebalancing for you according to your risk tolerance.
|Great place to start investing in the market if you don’t feel too confident||Slightly higher fees than DIY investing|
|Portfolio automatically rebalances according to your risk tolerance||No need to worry about asset allocation or risk tolerance|
|Ability to use with registered and non-registered accounts||Limited to set portfolios offered by robo-advisor|
Robo-advisors may be for you if you want to start investing in the stock market but just don’t know where to start, or the ideas of asset allocation and risk tolerance seem overwhelming.
If you’ve decided to try robo-advisors, here are some action steps for you:
- Research which robo-advisor you would like to work with (I like the ease of Wealthsimple)
- Be prepared to transfer money into your investment account with the robo-advisor
- Start small, don’t transfer all your funds over at the beginning
There are many different financial professionals with various levels of education and fiduciary responsibility. Not every financial professional is equal. This is why it is so important to do your research and get trusted referrals before deciding to go all in and work with someone.
Like any professional you may work with, personality plays a big role. Look for someone you feel comfortable working with, not just the cheapest person.
Bank Investment Advisor
A bank investment advisor is someone who works at a bank and provides investment advice. When working with a bank investment advisor, you will often pay no upfront fee as the fees these advisors earn are built into the funds they recommend, often in terms of commission.
There is a significant opportunity for bias when working with a bank investment advisor as they have a vested interest in recommending products that pay them the highest commissions. And the training required to be a bank investment advisor varies greatly.
I have sat down across from a bank investment advisor a few times, and they were unable to answer my (what I thought were) simple questions. I’m not saying this to brag or show that I’m a genius (I am not). But instead to highlight the gaps in knowledge that some bank investment advisors may have.
It can be easy for a beginner investor to fall prey to the predatory sales tactics of some bank investment advisors. This comes from a lack of knowledge and may cost you (the investor) a lot of money in the long term.
|“Easy” – attached to your bank||May not be the most educated person you are working with|
|Cater to beginner investors||May use predatory tactics with beginner investors|
|No cost upfront||Fees are hidden and can be very high|
Working with a bank investment advisor may be for you if you know exactly what you want to invest in and aware (and comfortable with) of the fee structure.
If you’ve decided to work with a bank investment advisor, here are some action steps for you:
- Ask a lot of questions – if you don’t understand something, keep asking questions until you do
- Find out what the fees are before you invest any money
- Don’t feel pressured to make an immediate decision – it’s okay to sleep on things.
A fee-only financial professional (planner, advisor, coach, etc.) is very different from a bank investment advisor. With a fee-only financial professional, you will often pay a fee upfront for working with them. And because of this fee, the professional will usually provide you with guidance in your best interest.
The type of fee-only professional you choose to work with will dictate what they can and can’t help you with. Some professionals can provide specific investment advice, while others can’t.
It is essential to do some research before jumping into a relationship with a fee-only professional. You will want to decide exactly what you want to get out of the relationship to work with the person who is the best fit.
We have yet to work with a fee-only professional but may do so in the future as we start transitioning to becoming work optional. There are some big questions that we will need guidance with that a fee-only professional can provide.
|Professional usually has a fiduciary responsibility to the client (they work in your best interest)||Upfront fees may be higher than expected|
|Professional is not solely recommending products with the highest commission||It may be challenging to find the “right” person to work with|
|Often the professional will develop a comprehensive plan for you||Depending on the profession, the professional may not be able to provide investment advice|
Fee-only financial advisors may be for you if you want a hands-off approach to investing or would like some personalized guidance with your finances and want to work with someone who has your best interest in mind.
If you’ve decided to work with a fee-only financial advisor, here are some action steps for you:
- Ask around for recommendations from people you trust
- Decide what you want to get out of your relationship with a fee-only professional
- Once you’ve narrowed down a list of potential professionals, see if they offer a free consultation – this is a great way to see if you and them will be a good fit.
As you can see, there is no one cookie-cutter way to start investing in the stock market. For years I let overwhelm stop me from making progress financially. I worked with the wrong people without realizing there was another way.
Whether you choose to start with DIY investing, working with a robo-advisor, or hiring a professional, start with small steps. Every small step in the direction you are going will help to grow your investing confidence.
You may not feel like you need investing confidence now, but there will probably come a time when you will. The best time to start is now.
The information in this blog post is for entertainment purposes only and should not be considered investment advice.