Stereotypes would have you believe that women are conservative, risk averse investors while men are willing to risk it all for a big pay off. In many cases this is true, and that’s why you see banks and financial institutions filled with gruff, confident and aggressive male investment bankers who will do anything to get the deal done. But in my house the tables are literally turned.
When I first met my husband he was willing to take as much risk as a hungry man at a buffet dinner; he wanted his return to be guaranteed and his capital never put at risk. I, on the other hand, had just discovered the joys of online trading and was buying and trading daily. For me there were good days and, as the financial crisis crept closer, very bad days.
The Sexes Face Off Over Saving
A new survey by RBC looks to understand the difference in men and women when it comes to how they invest their money and what they’re saving for. According to the bank’s Direct Investing poll, women are more likely to save money for their children’s education and men are more likely to stash money away to reach a monetary goal. Women ultimately want peace of mind and men want to get richer. But, one goal both sexes have in common – and that’s saving to improve their future prospects.
The survey finds the largest motivator driving women to become more involved in managing their investments is a life event. For men, on the other hand, it’s knowing how much money they have now compared to what they will need in the future. Women think, “can I retire comfortably?”, while men think, “I need to save $1 million by the time I’m 50.”
Just like my husband and I, couples often face the dilemma of dealing with two different investing personalities. Usually one is more aggressive then the other. It’s important early on to recognize what your goals are financially and how you’re going to make them happen together. Investing by yourself for yourself never really works.
So… what kind of investor are you? Here’s some of the most common types:
The Conservative Investor
“I want to earn slow and steady.”
You’re the kind who wants little risk on your principal investment. Earning a steady, albeit small, stream of income keeps you happy as long as the investment is moving in one direction – UP. In this case, the best place to put your money is in fixed income products like GICs and bonds. Also consider blue chip dividend paying stocks, if your investment horizon is long, you will see the benefits of compound interest over time.
The Moderate Investor
“I’m afraid I’ll miss an investment opportunity.”
It’s a classic fear that you’ll remain on the sidelines as everyone else makes big money, but you’re still afraid to take the plunge. The easiest way to get into the market – and not lose sleep – is to invest small amounts over time, says Winnie Go, Senior Wealth Advisor at ScotiaMcLeod. A few hundred dollars each month into a low-cost mutual fund or ETF will help take advantage of all the swings in the market. I prefer a management expense ratio (MER) of less than 1 per cent – anything more and it’s eating away at your profits.
The Aggressive Investor
“I like to take big risks with the hopes of a big reward.”
Penny stocks, small mining companies, options, derivatives and day trading is what you live for. You’re willing to go all-in on a stock because you want the best payoff when you invest on the right side. Admittedly this strategy takes a lot of guts and I recommend you should only use money that you can afford to lose. In the last three years the wild market swings made a lot of money for some investors, who were savvy enough to go short when everyone else was long. There is huge great downside risk to this strategy, though, and anyone taking part should be fully aware of this. They don’t call the financial markets a shark tank for nothing: the most hungry to win is the one taking home the most money.
Finding Common Financial Ground
After three years of marriage my husband and I have met in the middle, he’s buying more stocks and taking some risk and I haven’t made a trade since last year and have all my investments on a systematic investment plan. The RBC poll found we are like most couples. “The key motivator for each gender differs, but both men and women recognize the importance of being knowledgeable and involved,” says Michael MacDonald, vice-president of Strategy, RBC Direct Investing.
The message, whether you’re male or female, single, or supporting a family of 5, is to sit down and make a plan for your financial future. Saving over time is the best way to build wealth and stay out of debt, most men and women can agree with that.
*This article is for illustration purposes only, please consult a qualified financial advisor before you make any investment decision.