Financial Feminist - 9. Beginner's Guide to Investing

Starting point is 00:00:00 So we hear about the wage gap a lot as a society. We talk about the wage gap constantly. 78 cents to a man's dollar. It's even worse if you're a woman of color, right? That's the average amount. And it's something we should continue to talk about. It's something that's super important to discuss. But what we're not talking about enough is the investing gap.

Starting point is 00:00:39 So women either wait longer to invest compared to men or don't invest at all. So we take less money because of the wage gap. It grows at a slower rate because we're not investing. And then on average, women live seven years longer than men do. So less money growing at a slower rate, and then we're expected to live longer on that money. How the fuck does that make sense? It doesn't. So what we need to do is start investing. The number one reason women don't invest is fear. Fear of getting started, fear of doing it incorrectly. And what ends up happening is we lose tens of thousands, hundreds of thousands, potentially millions of dollars by waiting to invest. Because when it comes to investing, time is more important than

Starting point is 00:01:26 the amount of money because of compound interest. What is compound interest? Simply put, it means that your interest earns interest. So let's say $1,000 at 25% interest, right? If we've gained 25% interest on $1,000, we now have $1,250. Now we're earning 25% interest on $1,250, et cetera, et cetera, right? Our interest is earning interest in addition to the original amount of money we put in. So that means if you're only able to contribute a small amount, either per month or one time, but you allow it to grow for decades, that money will be exponentially larger when you need it. Maybe for retirement, maybe for a big goal in the future, right? So I talk about this all the time, but my 100K, my original 100K at 25, at 65, by the time I'm set

Starting point is 00:02:21 to retire, that's the typical retirement age, that 100K will be over a million dollars. It will be multi-millions of dollars, even if I never contribute another penny. Investing is our best tool of protest as women. It is our best tool for wealth building. We talked about this earlier this week with Sally, but you're probably wondering, how exactly do I get started investing? How exactly do I get started? And how do I get rid of the intimidation? How do I get rid of the nervousness around investing and actually get started? So how I explain investing is with this strategy called the investing rule of twos. If you are driving, if you are on a bike, if you are somewhere where you can't take notes,

Starting point is 00:03:03 maybe log this in your head and come back. If you are seated, if you are on a bike, if you are somewhere where you can't take notes, maybe log this in your head and come back. If you are seated, if you are stationary, this is a great time to grab a notebook. All right, first rule of two about investing. Investing is a two-step process. This is the number one mistake I see people make when they're investing. They go and put money in an account, maybe that's in an IRA or in a 401k or in a regular brokerage account. And they go, cool, I'm done. I put $1,000 in, I'm done. It is a two-step process when it comes to investing. A bank account's a one-step process. You put $1,000 in, you're done. Investing, you have to put the money in, step one. And step two is to actually choose your investments. An IRA, a 401k, a brokerage account, these are not investments. These are accounts

Starting point is 00:03:53 where you keep the money. Then you have to go choose your investments. It's like putting money on a gift card, right? It's like, okay, I went and put $25 on a gift card. You got to go spend the gift card. It is a two-step process. I have seen way too many people put money into an investment account and then think they're done. And what that means for your money is it is just sitting in financial purgatory. It is just sitting there not working for you at all. And it's not even working for you with like a savings account interest because it's just sitting there waiting to be invested. And the most extreme example of this I've ever heard, and I'm going to try to get through this without crying. I never have. I was speaking on a panel a couple of years ago and I was with a financial advisor on this

Starting point is 00:04:41 panel and she was telling the story about Rose. Rose was this cute little 65-year-old woman who was a teacher and had worked so, so hard her entire life, 30, 40 years as a teacher. And every month diligently, she was saving in her retirement accounts. She was putting money in her 403B. She was putting money in her IRA and she was saving diligently for decades of her life. And then when she went to retire, she realized she had never actually invested the money. Her money had sat in financial purgatory for decades without her knowing it. So instead of taking this 350,000 that she contributed over these decades of her life and turning it into multi-millions by investing, it was simply $350,000, which sounds

Starting point is 00:05:32 like a lot of money, but $350,000 to sustain her for potentially 10, 20, 30 years was not going to be enough money. And it didn't even earn interest in a savings account because it just sat there waiting to be invested. It just sat there on the sidelines waiting to get into the game. And it never actually happened. So I say Rose's story. I tell Rose's very tragic, very sad story in the hopes that we don't ever have any more Roses. So please, please don't let this be you. If you are already investing, your first piece of homework is to go make sure that you've actually put the money into an investment account and then bought things with that money. And if you're getting started

Starting point is 00:06:15 investing, please make sure you do both steps. You open the account, right? You put the money in the account and then you go choose your investments. So you're thinking to yourself, what do I choose? This seems overwhelming. People talk about the stock market. It's like Leo DiCaprio shouting into a phone in Wolf of Wall Street. What do I invest in? There's two basic things to invest in. Only two. It's not more complicated than that. There's literally two basic things to invest in. This is your second rule of twos. The two things you can invest in are stocks and bonds. At the very basic level, you can either invest in stocks or in bonds. Stocks are tiny little slivers of companies. If you buy a share of Amazon stock, granted that's like owning a

Starting point is 00:06:56 grade of sand on Bezos' beach, right? But you own a tiny little share of a particular company. You are part owner in that company. This could be Amazon, Bumble, Shopify, Tesla, any company on the stock market, right? A typical financial advisor will tell you that stocks are more lucrative. They're also more risky. On the flip side, you have bonds. Bonds tend to be less lucrative, but more stable and consistent over time. but more stable and consistent over time. And bonds are the debt of a company or government. So you make money on the interest from loaning a company or government money.

Starting point is 00:07:32 You're on the flip side. You're like Sally Mae. You are earning money by offering a loan to a company or government. So there are two basic things to invest in, stocks and bonds. And then you're thinking to yourself, well, I've heard of mutual funds.

Starting point is 00:07:52 What are mutual funds? Mutual funds, index funds, ETFs, exchange traded funds. These are groups of individual stocks. One of the most important parts of investing is doing what we call diversification. That's a fancy way of saying we don't want all of our eggs in one basket. So when we are thinking about investing, if you just invest in Amazon, the likelihood is very unlikely. But say Amazon went bankrupt tomorrow, you could be out a significant amount of money. So one of the ways to mitigate your risk by investing in stocks is to invest in these groups of stocks, these mutual funds, index funds, ETFs. So mutual funds, index funds, ETFs, these are simply

Starting point is 00:08:27 groups of stocks. And it makes sense, right? Why invest necessarily in one company when you could invest in 500 or the entire stock market, right? It helps mitigate some of that risk of investing in individual stocks. The final rule of two, you have two basic options of how to actually get started investing. You can DIY it or you can use a robo-advisor. DIYing your investments means that you feel confident enough managing your investments yourself. You feel confident choosing index funds. You feel confident choosing what you're going to buy with the money you've put into the account. I feel confident enough doing that. I manage my own investments. I feel good about that. If you're listening and investing is really confusing or intimidating, this might not be

Starting point is 00:09:15 the best option for you, but it will save you some money by doing your own investments. There are a bunch of DIY platforms, but here are some examples. Vanguard, Fidelity, Charles Schwab, TD Ameritrade, etc. These are places where you are managing your own investments yourself. You're putting money in the account. You are then choosing what to buy with that money. You feel confident enough to manage your own investments. Now, if you don't feel confident managing your own investments, but you do want to get started investing, because you do, you do want to get started investing,

Starting point is 00:09:48 your second option is a robo-advisor. We had Sally Krawcheck on from Ellevest earlier this week. Ellevest is an example. I also recommend in M1 Finance, there's also other options. Betterment, Wealthfront, Wealthsimple, Acorns, probably heard of others as well. What robo-advisors are doing is they're taking a small fee to do it all for you. They're going to ask you questions like, what are your goals? When do you want to retire? What is your risk tolerance? Basically, how aggressive do you want to be? How aggressive do you want to be in the stock market? And they are going to make decisions, buy funds, buy stocks, buy bonds based on those answers. So it's a great way to get started investing

Starting point is 00:10:27 if you feel still too intimidated maybe, but you know you need to get started. I also have a third option, which is something that's coming this summer. And it's something that I am in the midst of building that I could not be more excited about. I am partnering with some friends to build an investment community, a place where all of us in the Her First 100K financial feminist community

Starting point is 00:10:50 can come to not only talk about investing, to feel like investing is less scary and less intimidating, but also to actually get started investing step-by-step. So if you listen to this podcast and you're like, cool, this was a lot of great info, but I still need to know what a mutual fund is, or I still need to know exactly how to get started. We are guiding you through that entire process. So if you're interested, if you want to learn more, we are in the midst of building it. It should be launching this summer. You can go to herfirst100k.com slash waitlist. You can also go to the link in the show notes, but that is your third option. If you want to hear from me, if you want to be guided through how to get started investing

Starting point is 00:11:25 and hang out with some dope women who are doing the same, this is going to be for you. So ultimately, when it comes to investing, even if you're a little intimidated, even if you're a little scared, I need you to get started. There's this thing called analysis paralysis, right? Where you think, I need to know

Starting point is 00:11:44 how to do absolutely everything, and I need to be a complete expert in order to get started. And that takes you months, years, decades before you actually start. And no, you don't need to be rich to start investing. That's how you get rich. And two, you don't need a lot of money, right? You just need to get started. Even if it's with a couple hundred dollars,

Starting point is 00:12:06 maybe a thousand dollars upfront, right? And then can't contribute again for a while. It's just important that you get started. I like to say learning how to invest is like climbing a staircase. It's honestly not much more difficult than that. Not much more difficult than climbing stairs, except that first step is like five feet high.

Starting point is 00:12:24 So I'm here to guide you. There are so many people out there to give you investing advice. I just need you to get started. Analysis paralysis is real, right? It's so easy to think, okay, I need to be an expert. I need to know exactly what I'm doing. I need to have all of the answers before I get started. And what ends up happening is you miss out on so much money by waiting weeks, months, years to learn how to invest. So even if it's just a small amount of money, even if it's just one time for, you know, you can't invest again for a while, I need you to just get started. right? This is your best form of protest. This is your best form of wealth building. And I know it's intimidating. I know it's scary. I'm here to support you. And I need you to just climb that five foot high stair and just do the damn thing. I'm cheering you on. Thank you for listening to Financial Feminist. Financial Feminist is produced and hosted by me,

Starting point is 00:13:22 Tori Dunlap. Theme song and audio production by Jonah Cohen Sound. Administration and marketing by Olivia Kulkana, Sophia Cohen, and Kristen Fields. Research by Arielle Johnson. Promotional graphics by Mary Stratton and photography by Sarah Wolf. A huge thanks to the entire Her First 100K team and community for supporting the show.

Starting point is 00:13:40 For more information about Financial Feminist, Her First 100K, our guests, and our sponsors, go to financialfeministpodcast.com.

Financial Feminist - 9. Beginner's Guide to Investing

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