The stock market doesn’t know you’re a woman

Do you consider yourself an investor? If you’re a woman, the answer is probably “no.”

Even women who easily manage their budget often are reluctant to embrace the idea of investing in the financial markets. But it’s probably even more important for women than men that they harness their money to the power of those markets.

Here’s why: A confluence of factors is leading to a chasm in the amount of retirement income women have compared with men. Thanks in part to the gender wage gap and lower average Social Security benefits, plus smaller retirement-account balances, the median annual income of women 65 and older is 42% lower than men’s, according to a study by financial-services firm Prudential Financial Inc. The study is based on several data sources, including the U.S. Census and the Social Security Administration.

The retirement-income gap is compounded, at least partly, because women often hesitate to embrace investing. And one reason for that is generally women want to feel completely knowledgeable before deciding on anything, whereas men tend to feel more comfortable winging it, according to an analysis of over 30 studies, cited by Prudential.

Thus, for a lot of women, if they don’t feel they really know about investing, they’ll stay on the sidelines. Combine that desire for more knowledge with a lack of time—women spend an average of 28 hours a week on unpaid work, which is 65% higher than men’s average, according to Prudential— and the result is women failing to invest.

“When it comes to investing, women’s shortage of time, combined with their desire for more information in decision-making, may fuel procrastination, lower engagement, and reduced confidence,” according to the Prudential study.

Perhaps it’s no surprise, then, that even though the vast majority of married couples surveyed said they share financial decision-making, fully half of those couples also said that investing is the husband’s province, according to a survey by financial-services firm UBS, cited by financial adviser Alice Finn in her new book, “Smart Women Love Money.” Finn is founder and chief executive of PowerHouse Assets, in Concord, Mass.

Yet there is no sexism or gender bias preventing women from investing, Finn notes.

“It might be a long time before we close the gender wage gap or pass legislation to guarantee paid maternity leave,” Finn writes, “But you don’t need to wait for anyone else’s consent before you get more engaged in your financial future.”

Finn also cites a Stash Invest survey that found that 60% of millennial women don’t see themselves as investors. “In actuality, an investor is anyone who puts money to work hoping to get a financial return,” she writes.

Who among us doesn’t want our money to work for us? Too often I’ve heard women say that “personal finance is boring” or “investing is too complicated.” But having the money to reach our goals in life is not boring, and investing is definitely not complicated. So why not let the financial markets help us build our wealth, even as we spend most of our time enjoying our lives, careers, families, and adventures?

Whether you’re trying to save through a 401(k) or other retirement plan at work, have a lump sum that you want to invest for the long-term, or are thinking that you’ve got $100 you could spare every month to invest for retirement, now’s the time to embrace the power of investing.

Below is a brief rundown of how to start investing, culled from Finn’s book as well as a free investing guide produced by Ellevest, an online financial adviser (look for the guide on Ellevest’s website, under the Resources tab).

1. Start now

What are you waiting for? “The sooner you get your money into the stock market, the sooner it can start working for you, year after year after year,” Finn writes.

Finn is referring to the magic of compounding, which you should take advantage of immediately. Say you invest $10,000 and earn 10% on it in the first year. That gives you an extra $1,000. If you repeat that process the next year, you’ll earn another $1,000—plus $100 on the $1,000 you earned in the first year. That extra $100: that’s the magic. Your money builds on itself, and all you have to do is stay invested.

If you have a retirement account at work, start diverting money from your paycheck. If not, go to a low-cost brokerage such as the Vanguard Group and open an account. Then put regular contributions on autopilot. If you qualify, you can open an IRA or Roth IRA to save for retirement, or you can open a regular (read: taxable) brokerage account. Or check out one of the so-called robo advisers: online advisers such as Ellevest (which has no minimum account balance and charges 0.5% of the money you invest, as a management fee).

2. Embrace stocks for the long haul

Yes, the stock market is volatile and you may lose money on a short-term basis. That’s why you need to have a long-term outlook for any money you invest in the stock market. Staying in for the long haul lets you ride out the small bumps and even the larger market corrections. Consider that all the people who ran away from stocks during the most recent financial crisis: After the market hit bottom in March 2009, it then proceeded to boom. The S&P 500 SPX, +1.00% one measure of the stock market, is up about 258% since then. And what about the long-term outlook for the market overall? If you believe that companies in general will continue to innovate and grow, then you believe in the stock market’s ongoing success.

Women might have a slight edge on men when it comes to investing for the long haul. “It’s about putting the money away and letting it grow,” says Sallie Krawcheck, co-founder and chief executive of Ellevest. “Women bring to the workplace and life in general certain characteristics that, on average, are different from men. One of them is they take a long-term perspective—and that is a real positive when it comes to investments.”

3. Make investing a habit

As noted in Ellevest’s “5 Rules to Invest By,” it’s a smart idea to invest a small amount out of every paycheck. Investing on a regular, periodic basis helps you avoid the problem of market timing—that is, trying to figure out the best time to buy and sell stocks. With a regular investing habit, you buy throughout all market environments, whether the market is up or down, and you don’t sell until you’re just a few years out from needing the money.

4. Ask about fees

When you invest, there’s more than one fee to watch for. First, if you hire an adviser, you’ll be paying that person in one form or another, so ask about management fees. Ellevest recommends not paying more than 1% of your total assets under management. Second, the investments you buy will charge a fee. Generally, mutual funds that track an index (both traditional mutual funds and exchange-traded funds) will be the cheapest way to invest. Third, ask about trading fees and any other charges. You want to shop around for low fees. Finn offers this example in her book: A $100,000 investment earning 6.5% a year over 30 years will become almost $500,000 if the investor pays a 1% annual fee. But if the fee is 2% a year, the end result is $375,000.

5. Diversify

Investing doesn’t have to be complicated, and one reason is that you can pick index mutual funds, rather than getting distracted by all the various individual stocks. “Should I buy Apple AAPL, +0.13%? Should I buy Google GOOG, +0.03%? You can spend your whole life trying to figure out which individual stocks to buy, but you’re missing the big picture,” Finn says. She recommends investing in a low-cost portfolio of index mutual funds.

Your next question is which mutual funds. “Asset allocation—how you divide up your assets—is your most important decision, not what individual stocks you’re going to buy,” Finn says. That is, what portions of your money will you put in stocks versus fixed-income assets such as bonds and cash. Within stocks alone, of course, there are many different categories, including mutual funds that focus on U.S. small-, mid- and large-capitalization stocks, international companies and many more.

You don’t need a dozen mutual funds to invest for your future. For some ideas on which mutual funds to use for your long-term investing goals, check out MarketWatch’s Lazy Portfolios. And Finn’s book has a detailed guide to how to think about asset allocation. Finn also offers insights into any of what she calls the five fundamentals of investing: 1) investing in stocks for the long haul, 2) allocating assets, 3) using index funds, 4) rebalancing regularly, and 5) keeping fees low.