This One’s for the Ladies

So where am I going with this one, you ask? Simple. There is a distinct difference between the investment traits of men and women. For the sake of this blog, I’m going to focus primarily on single people, as that’s my demographic. Where many married people are “DINKs”, meaning Dual Income, No Kids, my group of friends and I are primarily “OINKs” One Income, No Kids.

In my book “Castles & Moats”, Chapter 27 speaks to the different types of risks and how they can affect you. There are eight that I discuss, but for the sake of word count, I’ll refer to what I think are the biggest ones, I’ll talk about what I call the “big three.”

• Market risk
• Inflation risk
• Longevity risk

Market risk is just that. The day to day volatility of the stock market and how it affects your 401(k) account. It fluctuates every minute of the trading day. There are no guarantees in mutual funds, or other subaccounts, such as Target Date Funds, or Lifestyle Funds. You’ve heard it said, “Its not timing the market, but time in the market.”

Inflation risk affects your purchasing power. It’s something that we are all feeling today in the increased costs of buying our goods and services. We see it at the gas pump, the grocery store checkout, and especially in the costs of housing, either the increased cost of renting, or the increased interest rates in mortgage loans.

Example: “The Rule of 72” is a simplified formula that calculates how long it will take something to double in value, based on its rate of return. Example: If inflation averages 4% over the remainder of your life, then 72 divided by 4 equals 18. If in that time period, you have to make a capital expenditure, such as a new car with a current value of $50,000. Then the cost to purchase will have doubled during that time frame and the cost will become $100,000.

Longevity risk is something that is one of my personal concerns. The risk of outliving my savings and investments. Dad made it to 91 and Mom is approaching 92. I know we’re not promised tomorrow, but the odds of me outliving them are fairly high.

You’ve seen the ads saying, “My life expectancy is 87 but my money life expectancy is 82!” That’s a very real statement. How much can I spend today as to ensure that I’ll have enough money to live at age 92!

Getting back to the ladies, here’s how these risks all fit together.

• Women like security; men are risk takers
• Women are less confident than men in their investing abilities. (FINRA.com)
• On average, women live 5.8 years longer than men. (scientificamerican.com 11/14/23)
• Women tend to “set it and forget it” and outperform men by an average of 1.0% when investing. (wellsfargo.com)
• Women are in the workforce fewer years than men. (Bureau of Labor Statistics, April 2021)

Putting all of this together, if you’re a single woman, your investments are moving into the headwinds of risk. However, a conservative risk assessment, combined with inflation risk and longevity risk could put you in danger of outliving your retirement savings.

Example: By avoiding market risk, then inflation risk will eat away at your purchasing power in retirement, and longevity risk could create a scenario where you outlive your retirement savings.

A good advisor should use every financial tool available to them. This is where the Fiduciary Standard comes into play as I must act solely in the best interests of YOU, considering all facts and circumstances surrounding YOU and YOUR NEEDS. Keep in mind that advertising and professional bias is swirling around you. Just because someone makes a negative statement about a particular investment or financial tool doesn’t make it bad. It’s just their belief and oftentimes it can be completely wrong.

In conclusion, when I call myself a “financial psychologist” or a “professional explainer” maybe now you see why. Risk in investing is everywhere. Living too long. Getting sick too soon. Having your retirement savings eaten up by inflation. There’s a long list there.

Last month, I wrote about “You Are Here” If you’ve made it this far down the page, maybe go back and read that one too. As always, I’m here for you. Can I make a difference in your life? I think so, but only after a coffee conversation. Time to move forward? Hit reply and let’s see if I can make a difference in your life in the way I am doing with all of my current clients.

As always, thanks for your readership and kind words when we see each other.

Many thanks,

Brian

**Examples are intended for illustrative purposes only and may be not indicative of your situation. Individual results may vary.