The Profit Hoarder

Advice Friend

Kumi found herself talking to her girlfriends about personal finance more than anything else — so she took her advice to TikTok, where she vlogs about her daily life as a marketer at a large technology company and breaks down money management tips like how to create a budget with AI or how to start an emergency fund.

Questions around investing often pop up in Kumi’s comments and DMs — like how do you start investing if you’ve never done it before? “I think there’s this misconception [among women] that investing is hard,” Kumi said. She has a formative memory of her dad helping her aunt sort through her investment, retirement, and savings accounts after her uncle passed away — she always saw managing the family finances as her husband’s job, and had no idea how to sort through all of the accounts without him.

In fact, a lack of financial literacy is a common issue for women, who tend to have a lower comprehension level of financial topics than men. The tide seems to be turning, though: According to a recent survey, 67 percent of women were investing outside of retirement in 2021, up from 44 percent in 2018. Here’s how to start thinking about investing — even if you still don’t know the difference between a stock and a bond — with tips and advice from Kumi.

Hands with a line chart

Photo illustration by Samantha Shin

Take a good, hard look at your personal goals

The first step Kumi recommends is considering your financial goals as well as your lifestyle. “Everyone has different money values,” she said. Some people might want to start dabbling in investing with a small portion of their monthly budget; others might be ready to slash their spending and live very frugally in order to reach a higher goal. For example, Kumi knows she’s not willing to give up her creature comforts, even if it means she could invest more of her income now and potentially retire earlier.

Determining how much time and effort you’re willing to put into investing will also help you pick the right investment vehicle for you. “There are some people who are ready to go all in and read all the investor reports and the shareholder reports every quarter [for individual stocks],” Kumi said, while others might prefer a set-it-and-forget-it method like investing in target date funds.

That even applies to larger investments like real estate. Kumi would love to purchase an investment property one day, but realized she would want to hire a property manager to handle the day-to-day operations of a rental — something she just doesn’t have the income to support yet. Considering how much money you can afford to invest and how much work you’re willing to put into your investments will help make the process as seamless as possible.

Gather expert advice

As a beginner, you don’t always know what you don’t know — which is why Kumi recommends consulting experts like financial advisors, accountants, and even an employee at your bank. When Kumi opened her first Roth IRA, she tried following her bank’s written instructions — but found it too confusing and instead called so someone could explain what she needed to do over the phone. “A lot of banks will give you that personal finance education, free of charge,” she said. Whether you decide to open a brokerage account or invest through a retirement plan like a traditional or Roth IRA, expert advice is crucial for beginners. Kumi also recommended reading personal finance books written by professionals, listening to podcasts hosted by experts, or checking out the free resources on Secret’s Money Moves website.

“If you managed to open up a checking and savings account, you can open a brokerage account to set up an index fund or get a robo-advisor.”

Robo-advisors — automated platforms that choose investments for you, based on your goals — can also be an easy option for people who want an easily automated option. Many robo-advisors even offer tax-loss harvesting, or timing the selling of securities to avoid capital gains tax on profitable trades.

If that was already too much financial jargon for you, there’s an even simpler option: target date funds. These funds are geared toward the year you plan to retire, and rebalance over time to avoid significant risk close to that date. One analysis showed that 31 target-date retirement funds posted average annualized returns of between 4.9 percent and 7.7 percent from 2018 to 2021 — much better than the average 3 or 4 percent you see on high-yield savings accounts. “Maybe you’re not going to have the crazy run of 50 or 100 times profits, but it’s so much better than doing absolutely nothing and letting your money sit,” she said.

Start early — even if that means starting small

“The biggest advantage you have is time,” Kumi said, and that’s due to compound interest. As your investment grows, you’re earning interest not just on the initial balance — but any interest you earn as you go. Let’s say you invest $100 at a 5 percent annual rate of return. That means after one year, you’d have $105 — but after 25 years, that initial $100 will have grown to more than $338. Now imagine the power of compound interest at an investment with a higher rate of return over a longer time period.

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Starting your investing journey early also gives you more time to recover from potential mistakes, Kumi said. Though you likely have less money to invest when you’re young, you also likely have fewer responsibilities, like a mortgage, family expenses, or caring for aging relatives.

“If you already started cushioning your financial foundation or your investment accounts early, even if you’re not able to put in as much later, it’s still benefiting from that compound interest, so you’re still making more money over time,” Kumi said.

Try not to be intimidated

One of the biggest hurdles for beginner investors is mental, Kumi said. She remembered a conversation with a friend who figured she would just wait until she found a partner and got married to start investing — it seemed too daunting to start on her own. That kind of limited belief in yourself is exactly what holds many young women back — but it doesn’t have to be. Kumi said having open conversations with friends and family about your finances can also help break the taboo around money and help you take control of your financial well-being.

“If you managed to open up a checking and savings account, you can open a brokerage account to set up an index fund or get a robo-advisor,” Kumi said. Start with an investment strategy that’s as simple and as low-risk as you need. As you gain more knowledge, you can expand into something more complex if you like, she explained — but you have to start somewhere.

This content is for informational purposes only. You should not construe any such information as legal, tax, investment, financial, or other advice. There are risks associated with investing in securities and other investment vehicle

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