Mutual Funds A Natural Fit In Womens Financial Strategy
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Women face unique realities when it comes to finances. Even though women participate and contribute to employer-sponsored retirement plans at the same rate as men, statistics show women tend to earn less money than men, so their returns can be lower.
Also, many women see their financial life threatened by widowhood or divorce, which can impact their retirement wealth.
Most experts agree that in order for women to help secure their own financial future, women should begin by educating themselves. They could do this by attending investment seminars, reading financial books and magazines and most importantly, by asking questions about financial issues.
Advisors should remind women clients to invest in their own name. There are some practical reasons for women to keep accounts in their own name. Should a womans estate become large enough, joint assets might be subject to taxes when she or her spouse dies. In addition, if her spouse becomes incapacitated, she cant sell jointly owned assets unless shes prepared durable powers of attorney.
In addition, holding individual investments in her own name will help her take responsibility for her financial future.
Before she gets started, a woman client should think about what she wants from her investments. Is she concerned about short-term goals like buying a car? Or does she want to build a nest egg for retirement? Her goals and time frame for achieving them will help determine how much investment risk she should assume. If she has a substantial time horizon for achieving her goals, shell have the luxury of focusing on the long-term performance of her investments, making short-term market swings easier to tolerate.
Women clients should be warned against the temptation to be too conservative. Many women let fear of a market downturn drive them to make investment decisions that are too conservative for their investment timeline.
The risks of being too conservative are just as great as the risks of being too aggressive. Heres why: a hypothetical investment that returns 5%, with an after-tax yield of 3%, provides a return of zero assuming a modest inflation rate of 3%.
