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Women are paid less than men and are more likely to leave the workforce to take care of loved ones, both of which negatively impact the amount of money they have to save and invest over the course of their lives. Despite this, just half of Americans (50%) believe women have disadvantages compared to men when it comes to long-term investing, according to a new NerdWallet survey.
The survey was conducted in July 2021 — in the midst of the pandemic that has only deepened women’s systemic and socialized disadvantages. Yet the fact remains that in order to invest and build wealth for the future, women need to contend with these hurdles. Below is advice for how to combat five investing disadvantages that disproportionately impact women.
1. Evaluate your risk tolerance
Around 1 in 6 Americans (16%) believe women being more risk averse than men is a long-term investing disadvantage, according to the NerdWallet survey. It’s important to consider and acknowledge your personal risk tolerance when choosing investments. But if you’re so risk-averse that you’re unlikely to hit your financial goals or you’re avoiding the stock market altogether, it’s probably time to reevaluate your strategy. Diversification is one effective way to reduce your risk while still growing your portfolio.
You can diversify your portfolio not just by asset class — for instance, stocks and bonds — but also within asset classes. That could mean investing in companies of different industries and different sizes. If a specific company or industry underperforms, the rest of your portfolio may balance it out.
Diversification doesn’t have to be complicated. Funds, like exchange-traded funds or mutual funds, are made up of a mix of investments, so you’re diversified within a single asset. Aim to find a balance between your tolerance for risk and your goals, and use diversification to make you more comfortable investing for your future.
2. Increase savings as you can
The survey shows that close to a quarter of Americans (23%) believe women earning less than men is a long-term investing disadvantage because they have less money to invest. As of 2018, women earned, on average, 82 cents for every dollar men earned. And this gap is significantly wider for many women of color. Inequality of earning means women often have to save a higher percentage of their income than men do.
If you have a 401(k) through work, you may be able to set up automatic incremental increases — for example, 1% each year. You can also choose to bump up your contributions as you get …….