Be Your Own Investing Cheerleader

As many of our readers know, our firm works with many clients and investors who are women. Although we do not want to generalize or make assumptions based on gender, it is not uncommon to hear from female clients that they prefer to have a large portion of their portfolio in low or no-risk cash investments as a means to creating a large financial safety net. As women and as planners, we wholeheartedly understand this concept and the reasoning behind it. However, as advisors, we also know the dangers behind keeping too much cash in a portfolio or keeping it too low risk.  

Women typically live longer than men and most of us will spend our final years taking care of ourselves. In addition, women are still earning just $0.80 for every $1 a man makes and many of us step away from the workforce at one point or another to care for children or elderly family members. This further lowers our ability to save for our futures and tends to decrease Social Security benefits. As well, several of these factors have been compounded by the impact of the COVID-19 pandemic.  

Many women are naturally risk adverse creatures. According to a 2018 study by J.P. Morgan called Women & Retirement, women investors tend to take average or below average risk in their portfolios while men are more likely to take above average risk with their investments. In general, this means women’s long-term average investment portfolio returns are likely to be lower than men’s, which further reduces the amount of available savings to take care of ourselves later in life.  

If you’re not taking enough risk with your investments, you may not be able to grow your investment portfolio enough to outpace the rate of inflation. This means by holding too much cash on the sidelines or keeping a too large a portion of your portfolio invested in low-risk bonds, you may end up taking more risk than you realize by not protecting your future buying power. I say all this not to scare anyone, but rather to remind our readers that while downside risk with investing can be intimidating, the opportunities for upside risk and growth in your investment portfolio also exist.  

Have you ever gone to a sporting event and heard the cheerleaders shouting the cheer, “Be aggressive, be, be aggressive!”? That was the first thing that sprang to mind as I sat down to write this article. Admittedly, I had to check with one of our employees who is a former cheerleader to make sure I had the wording right. While I don’t necessarily advocate for an aggressive amount of risk in every person’s portfolio, this may be a good cheer to say to yourself if you’re struggling to take on an appropriate level of investment risk. Just know that an advisor who has your best interest in mind will help you select an appropriate long-term investing plan with the right amount of risk for your needs. If you’re not sure what’s right for your situation, ask a professional (like one of us) for help.

- Margaret Gooley, CFP®, CDFA®, Worley Erhart-Graves Financial Advisors