Since we’re roughly half the world’s population, it seems odd to generalize about women. We’re individuals with unique life experiences, circumstances, and objectives. However, to optimize a $1 million investment opportunity, it’s important to consider how gender-specific financial challenges might color sound financial guidance:

Longer lifespans:

Statistically, women live longer lives. According to The Journal of the American Medical Association, women in the U.S. live about six years longer than men, so their money needs to last longer, too.

Caretaker roles:

Women are often the designated caretakers for their children, parents, and others in their communities. That caretaker role frequently has financial consequences.

Risk aversion:

As guardians for others, women may spend their energy avoiding scarcity rather than pursuing financial well-being. This mindset can lead to under-investing or investing too conservatively to build wealth.  

Shorter careers:

Taking time away from their careers to care for others, whether by choice or circumstance, results in fewer earning years.

Inadequate preparation:

Many women are accomplished entrepreneurs, investors, and CFOs who are very comfortable managing their finances. However, some struggle with money matters. Women who are navigating a change in circumstance, whether through divorce, widowhood, or inheritance, may feel inadequately prepared to take charge of their finances.

The Flipside of Challenge: Opportunity

The good news is that, with proper financial planning specific to women, these challenges can be turned into opportunities to transform a $1 million investment into enduring wealth and an independent, secure future.

Longer lifespans:

A longer lifespan confers more time to build wealth through investing. Here are some investment ideas that leverage that advantage.  

  • Investing in AI: Artificial intelligence can support the growth of many other industries, including healthcare and financial services. Implementing AI can generate topline corporate growth and improve the bottom line, especially over time. Some of the companies driving implementation might merit investment consideration. Ask your financial advisor about major players in this space. You might want to consider Exchange-Traded Funds (ETFs), like IGM and XLK. For more information about investing in AI, watch our on-demand webinar, Where Artificial Intelligence Investing Is Headed.
  • Related opportunities: Capital expenditure in technologies related to AI is unlikely to slow down. Market leaders and top growth companies will need to spend on supercomputers, semiconductors, cloud storage, data centers, energy, and infrastructure companies for fear of being left behind. This demand could make investment in these industries a compelling opportunity.

Caretaker roles and risk aversion:

A protective instinct often leads women to adopt a low-risk, low-return investment strategy. But “low risk” doesn’t necessarily mean “safe.” With insufficient growth, investors could outlive their money. Here are some ways to add growth:

A Hypothetical Example[1]:

Consider two possible investment scenarios. In the first, we invest $1 million in money markets (e.g., VMFXX), earning a 1.8% average annual return. In ten years, we would realize a total of about $1,200,000. In the second scenario, we invest $1 million in a moderate-risk portfolio, with 50% in stocks and 50% in bonds (e.g., VBIAX). Assuming the past ten-year return of 7.8%, at the end of ten years, we would have doubled the $1 million to $2.2 million. 

To successfully balance growth and income, investors need a portfolio capable of weathering ever-changing market conditions. At Cerity Partners, advisors typically mitigate risk and maximize growth by allocating to a combination of U.S. and foreign stocks, such as VOO and ACWX. Cerity Partners also looks for high-quality bonds in funds such as the Baird Aggregate Bond Fund. Of course, there are times when even the most carefully constructed portfolios will decrease in value. But over time, stocks generally increase in value. If you stay in the market, odds are that you’ll come out ahead.

Use dollar-cost averaging:

With current market and geopolitical conditions, you may be worried about making a timing mistake. If so, take baby steps and buy a consistent amount of a low-cost index fund, such as those mentioned above, on the same day each month. Train your discipline. Try to keep your emotions out of the process. Even in months when you feel uncertain, keep investing.

Shorter careers:

Taking time away from our careers to care for others, whether by choice or circumstance, results in fewer earning years. However, there are two financial planning tools that can be ideal for useduring career interruptions and lower-income years.

Roth IRAs:

Funding an individual retirement account can help build wealth. Here’s how:

  • Tax-free compounding is one of the best strategies for creating wealth.
  • You can use the Roth IRA to invest in growth stocks.
  • Down-market years are often the perfect time to convert to Roths. Don’t let the scarcity mindset stop you from making a smart move!
  • Exposure to growth sectors in tax-advantaged accounts, like Roth IRAs, can build wealth over time.
529 Plans:

These tax-advantaged savings plans help pay for education, including tuition and related expenses, so that you can provide for dependents and even spend it on yourself! Here are some of their advantages:

  • In some states, 529 Plans not only grow tax-free, but contributions are also tax-deductible.
  • Any unused 529 monies can be rolled into a Roth IRA for your children.
  • If you’ve had to take time away from your career, re-entry to the job market can be challenging. You can use the 529 to pursue an advanced degree that gives you a competitive edge.
  • Learn more about 529 Plans for retirement

Inadequate preparation:

The self-awareness to know you don’t have all the answers can yield quantitative benefits if it leads you to find capable, trusted financial specialists. Cerity Partners offers robust, full-spectrum wealth management services for women with advisors experienced in supporting women during times of change.

Whether you want to open a business, establish a philanthropic legacy, provide for future generations, or explore how to optimize a liquidity event, we’d be honored to help you achieve your goals. 

[1] This hypothetical example is for illustrative purposes only and does not represent actual performance. Past performance is not indicative of future results. Actual results may vary depending on timing, market conditions, and other factors.

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