Investing during times of uncertainty - A guide for women
If you’ve been seeing the news lately, you must have heard about the upcoming recession. With experts warning of a ‘mild to hard recession’, the ongoing energy crisis in Europe and of course, the constant updates of worldwide political uncertainty and climate change, it doesn't seem like the best time to be investing. For women, this is even harder, given the bias that women are risk-averse. Moreover, women often blame themselves for losses, chalking up a bad investment to their own lack of knowledge instead of a bad market or shifts in the national or global economy.
Add it all together and sticking your head in the sand like an ostrich sounds like a great option. But really, these are excuses! You need a mindset shift to tackle upcoming challenges and help build a secure future. Read on to find out our recommendations for investing during a recession.
Take short-term steps to manage finances
When it comes to managing finances, especially during times of uncertainty, start small. First, build an emergency fund which allows you to cover three to six months of essential living expenses. If there are any unexpected expenses or unfortunate job situations, you will be able to take care of yourself. You can do this by cutting out unnecessary expenses and putting extra money away for savings or investments. Cash reserves are essential during recessions and other global uncertain times. Additionally, look into consolidating debt or refinancing loans, i.e. minimizing high-interest debt, to reduce payments and save money over time. Specifically, map out a plan to pay your credit card loans.
Also, it is a misconception that you require a lot of money to start investing. Not at all!
-> With just US$50 you can start your investment journey to help prepare you for any external or personal changes. Taking small steps towards financial management now will help you achieve long-term financial success!
Take the long view when it comes to investing
During a recession, you need to take a long-term approach to investing. Even generally, think about investing at least for seven years - leave your money alone! Short-term stock market fluctuations, especially during uncertain economies, can be disheartening, but they don't necessarily mean that your investments are doomed.
Instead, use falling stock prices as an opportunity to add value to your portfolio. While it may be tempting to panic and sell off your stocks, remember that the long-term trend of the market is upward and many short-term losses will eventually be recovered. So, focus on finding investments that can stand the test of time. This can include investments that cover a wide range of the stock market or real estate market, both of which are known to increase in value over time. Investing with a long-term outlook allows you to keep your focus on the bigger picture and reap the rewards of steady growth over time.
Review and diversify your finances
If so far you've been focused on high-performance, high-risk assets (such as crypto, precious metal or single growth stocks), a recession is a great time to diversify. There are several investing strategies, recommended by experts. First, invest in defensive stocks. This refers to companies that can withstand economic downturns as they provide essential items such as food, electricity or shelter. Forbes has recommended the top utility stocks and consumer staples stocks of 2022 that can help protect you during the upcoming period. Additionally, it is recommended that you buy quality assets. What does that even mean!? As per an article in Forbes, it refers to “all-weather businesses” that do not depend on economic growth. For example? Companies with high recurring revenue (e.g. subscription models) and those that have a low debt ratio. Also, examine the history and performance of a company, if it has a good track record, chances are, it'll continue to perform well. This is not the time to invest in the coolest new start-up that doesn't even have profits yet.
And, of course, the age-old advice stands - invest in index funds. It's the easiest way to diversify and also not be too concerned about managing your investments day in and day out. An All Country World (ACW), S&P 500 or MSCI World Index is a great place to start if you are concerned. With proper diversification and regular review of your investments, you can better manage potential risks and maximize returns on your investments over time.
Invest in female CEOs
It might seem like doom and gloom, but it doesn't have to be. Recessions can also be a time for opportunity! There were SO many new companies that were formed during the 2007 recession including Uber, Slack, Venmo etc. It is obvious that investment in women-led companies has been slow. For example, in 2020, it was estimated that only 2.3%!! of all VC funding went to female founders. But research has shown time and time again that these companies perform better. A study conducted by BCG found that for every dollar raised, female-led startups generated 10% more revenue than male-led startups.
So - maybe it's time to start investing in women's companies. Not only do they perform better, but women are also affected disproportionally in times of uncertainty. These challenges allow them to create solutions that would have otherwise been overlooked. And as stated in this fast company article, "There's a lot of money to be made by investing in diverse founders and companies that build themselves with diversity in mind. Those companies are going to stand to do well, and the early movers who take advantage of that are going to reap the lion's share of rewards.”
Communicate with and learn from other females in finance
Finally, connect with other women - you are not alone! By talking to experienced women who have already been successful in finance, you can learn valuable lessons about how to manage your career and grow your pot. You can start to build your financial literacy to feel more confident about taking financial decisions. It's also super important to talk about money! Find out your friend's and colleague's salaries, how they're investing and what are their concerns. A great way to do this is to set up a money date with your circle. Discuss all things money for 2023, plan your budget and hold each other accountable.
And of course, we would love to welcome you to our 90 days to Financial Freedom course. It is a one-stop shop to answer all your financial concerns while also setting you up for success in your finance journey. We help women understand the basics of finance, budgeting and investment. What’s more, is that we will equip you with the right mindset to attract abundance. The best part? You will have an inbuilt community of like-minded women cheering you on along the way!