When it comes to investing, women face a lot of hurdles, like the persistent gender pay gap, interruptions in their careers, or simply being told that they won’t fare as well as their male counterparts. When women do invest, however, it turns out they do not only a pretty good job, but they’re better at it than men. According to an analysis done last year by Fidelity Investments, women earn slightly better returns on their investments than men and they also save more from their earnings in general.
While it’s true that the actual stat differences are small, they’re an important reminder that women are more than capable of making financially-sound decisions. And while there are plenty of guides and financial advisors who can guide you on how to make the most return on your investments, we’re big fans of women supporting other women.
Which is why we’ve asked some financial advisers on the best ways that women can invest in women.
Determine what type of “impact investing” appeals to you most
First, a terminology lesson. “Impact investing can mean something different to everyone, but it generally it refers to investments made in companies, organizations and funds with the intent to create measurable social and environmental impact alongside a financial return,” says Anna Colton, an executive at Merrill Edge.
Within impact investing, Colton outlines four main approaches:
Socially responsible: “Investing screens out companies based on faith or other personal preferences and avoids investments associated with environmental harm, tobacco, firearms, alcohol and practices that conflict with religious beliefs,” says Colton.
Sustainable investing: This helps investors chose companies that excel at a range of environmental, social and governmental factors. “For those interested in sustainable investing,” says Colton, “consider investing in companies that promote and achieve sustainability, encourage and measure corporate social responsibility and are leaders in fair trade factory worker safety.”
Thematic investing: It’s all about investment opportunities focused on environmental or social themes. Thematic investing “targets companies with areas of growth in gender equality and diversity, green initiatives, such as climate change or water security and healthcare,” according to Colton.
Impact first: This mode of investing “addresses specific social or environmental concerns using market-based solutions. Impact first investing aims to improve early childhood education and address homelessness,” Colton says.
Ask your financial advisor about a company’s ESG practices
When deciding where to make your investments, be sure to ask for information on a company’s ESG practices, which refers to how a company makes an impact on environmental, social and government issues. By speaking with your financial adviser, you can make informed decisions on what companies hold beliefs and values that are similar to yours.
At Merrill Edge, for instance, clients can research thousands of companies using the stock research experience to find out about a specific stock option before buying, selling or trading. They can then use an online portfolio to see how their specific accounts are doing.“With these experiences, investors are given individual scores on ESG practices compared to the industry and can learn more about which of their stocks are most environmentally-friendly, socially-conscious and governance compliant,” Colton says.
Look for companies that have strong social responsibility practices
While the number of women working at big companies in key leadership roles remains small, certain places have been identified as working toward closing the gap. Companies like Microsoft, Google, Proctor & Gamble, Merck, CocaCola, Intel, Cisco, Disney and IBM have all been identified as having strong social responsibility practices, says Marshay Clarke, a CFP atBetterment, the largest online financial advising site.
It’s always OK to start small and local
Maybe you think you don’t have the funds (yet!) to invest in the stock market like you wish you could. Don’t worry. You can always start small — and local. Community Development Financial Institutions (CDFIs) are another way that women can support other women locally, says Lauren Zangardi Haynes, a financial adviser in Richmond, Virginia.
“CDFIs make loans to local businesses that help support our social fabric,” says. By banking with a CDFI, you’re helping ensure the availability of loans that otherwise wouldn’t be available to the community.
And as always, remember, it’s never too early to start
“Women have amazing earning power,” Clarke says. “We’re graduating from the best colleges, we’re leading organizations, some of us are breadwinners for our household. It’s important to understand that women don’t need to make a certain amount of money or be in a certain stage in your life to invest. The earlier you start, the better off you will be in terms of growth, not just for retirement but growing your family wealth in general.”
Just consider, she says, the following scenario: A $10,000 investment in the S&P 500 in 1970 would be worth $1.02MM today, due to almost 50 years of simple investment growth and compounding.
Another easy way to get started is to check out Ellevest, the investing platform for women. The company — led by CEO and Girlboss Rally keynote speaker, Sallie Krawcheck — recently announced Impact Portfolios: a way for women to invest in other women. A “competitive return”and positive economic and social change? Here for it.
