Investments can be hard to understand, plain and simple. Amanda Steinberg, author of WORTH IT, helps us navigate the path toward successful investments.
Raise your hand if you’ve ever slipped into a money coma at the first mention of Wall Street gobbledygook like asset class, diversification, or basis point. I see many of yours are raised. So is mine. I used to feel ashamed that I didn’t know what any of it meant. Even when I’d occasionally get inspired to learn, I’d check out an investment services website only to feel assaulted by stock tickers, mobs of graphs and charts with weird decimals, and positive and negative percentages corresponding to who knows what. Why spend what little free time I had trying to slash my way through that swamp? I’d never get out alive.
Women are twice as likely as men to feel like they don’t know what to do with investments, according to research. When it comes to bigger-picture finances—looking deeply into what funds are actually in their 401(k)s, or investing outside of retirement accounts—women can feel like they’re doomed to mess things up. Men, however, are often so eager to call the shots that they’ll make impulsive I already know investments even when they’re just as confused as we are, as many studies show. We also know from those same studies that women don’t want to put themselves, and definitely not their families, in any tight spots.
Many women feel this way. So we quit too soon. Hold too tightly to cash. Tuck it in a money market or savings account, where we know we can get it out when we want to and if we need to. This is true for women who have no 401(k) or IRA, and don’t know what a brokerage firm is. It’s also true for highly funded women who have so much money they could easily max out their retirement funds.
A healthy savings account is a must. But if you have strong wings—emergency savings and good liquidity—you need to do something else with the rest of your cash. You could end up making a measly half percent interest in a traditional savings account instead of—cha-ching!—sometimes 10 or 20 percent in good years in an investment account. Investing is a huge opportunity. You really don’t want to miss out. You invest money, and, following a few basic principles, you make money. You can do it.
Now that you’ve mastered investing, should you switch from traditional IRA to a Roth IRA?