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Read This If You’ve Been Thinking About Investing
08.22.18

There exists in my brain a tiny man in a fedora, and whenever someone starts talking about finances, he makes a noise somewhere between a drone and a goose honk. I can hear nothing over this wall of sound, no matter how hard I concentrate. He gains strength every time I slide the check over to my husband, telling him to calculate the tip, or forward an email from HR to my dad, asking if he’ll read it and let me know which tax exemptions I can claim.

Moments like these make me feel stupid and small. This is never truer than when I think about investing, which has always felt to me like a demonstration of incomprehensible wizardry and is a facet of financial literacy I’ve essentially given up on trying to understand.

This is a mistake.

“Investing is the only way to build wealth,” says Bola Onada Sokunbi, a Certified Financial Education Instructor and the founder of Clever Girl Finance. “Any funds you don’t need in the near term — say, in the next five years — need to be invested in order to grow.” High-interest savings accounts are a thing of the past, and few banks offer more than 1% interest on these accounts. With inflation holding steady at around 2.5 percent annually, “you’re actually losing money” when you leave your savings in cash, Bola tells me.

This isn’t great news for me!!! It’s also shitty news for women overall, who currently don’t invest as much as men. According to research, women keep 71 percent of their assets in cash, compared to 60 percent for men. That 11 percent doesn’t sound dramatic, but it equates to more than $1 million over a 35-year career span.

So if you, like me, have struggled with the nuts and bolts of investing, how can you get started?

Consider your long-term goals

Before you start thinking about how to invest, says Bola, you need to know why you’re investing. Do you want to retire at 40? Pay for your child’s college education? Buy a home one day? Thinking holistically about investing makes it less nebulous and more connected to the future you are creating for yourself.

Asking these big picture questions can be overwhelming, but the process is a necessary aspect of guiding your investment strategy. “Think about what you want to accomplish in your life,” says Bola, and get granular: Picture your life in five years, 20 years, 40 years and identify which of those goals might require financial support.

With your goals in mind, you’re able to tackle the next step…

Determine your level of risk

“The stock market is cyclical,” says Bola. “Recessions are followed by growth, generally, but you need to know how much risk you can tolerate.” Perhaps unsurprisingly, women are more conservative investors than men. This isn’t necessarily a bad thing, especially when it comes to the effect these fluctuations can have on your mental health. Consider your decisions about where and how to invest the same way you would any other form of self-care: Will this increase or mitigate my anxiety?

Take cryptocurrency: It’s super popular, with potential for massive growth. It’s also extremely volatile. “The intense fluctuations in your investments are going to give you migraines if you are risk-averse,” Bola says, and this is especially true if your goals are shorter-term. There is less time for the market to reset or recover from periods of volatility if you are hoping to access your investments in the next five to ten years for the purchase of, say, a home; however, if there are 40 years between you and retirement, you can afford (literally) to gamble.

“The standard rule of thumb in investment timing is to subtract your age from 100 to figure out your investment split,” says Bola. “For example, if you’re 30, that’s 70 percent of your portfolio that you should keep in investments (higher risk), with the remaining 30 percent in cash or bonds (lower risk).” This equation, while not perfect, can give you a sense of a “reasonable” level of investment risk for your age, and can help guide you in the direction of more or less conservative strategies.

Consider your decisions about where and how to invest the same way you would any other form of self-care: Will this increase or mitigate my anxiety?

Financial anxiety is real, but learning how to integrate both your fears and your knowledge into your daily life is a crucial step in becoming a confident investor. There’s a balance between being educated and being obsessive. “You shouldn’t be checking your account every day,” says Bola. “We’re talking about money you likely won’t need to touch for at least 20 years, so who cares what happens in one day?” Tracking these inevitable daily fluctuations is liable to trigger needless stress or cause you to make rash decisions that could negatively impact your long-term goals.

Pick your poison

For most people in traditional, salaried positions, an employer-sponsored 401(k) retirement account is the best place to begin your investment journey. Once you have an emergency fund squirreled away, set up direct deposits from your paycheck into your 401(k). (We’ll talk more about retirement plans in detail in a future column.)

Not an option? “There are tons of great platforms that allow you to engage in fractional investing,” says Bola. Some of her recommendations include Acorns, Robin Hood, Betterment and Ellevest. “These platforms ask questions about your objectives and risk tolerance, or they pair you up with an investment advisor for a higher fee.” The great benefit of platforms like this (over traditional investment brokers) is that they allow you to get started small, with as little as $5. Plus, they’re able to make integrated decisions about your investments based on their knowledge of the market and data that you might not have. “You just want to pick a platform that works best for what you need,” says Bola, so take a look at minimums, fees and the level of care and service you can get.

Another way to simplify early investing is to work with index funds or mutual funds, rather than choosing individual stocks. These funds group together stocks in a way that allows you to spread your risk across the market.

“Let’s say you want to invest in a consumer retail,” Bola explains. “If you were to buy some stock in Macy’s, and they suddenly shut hundreds of stores, you’re going to be seriously impacted. If you choose a consumer retail fund, however, they’re likely invested in thousands of brands across the industry, so that Macy’s struggle won’t have that same effect on your money.”

With the availability of these robo-platforms, there’s really nothing stopping you from investing — unless, that is, you’re carrying high-interest debt. “Historically, the rate of return on the stock market is about 8 percent,” says Bola. “If you have a credit card with a 20 percent interest rate, and you’re carrying debt month to month while still putting money into your investment account, you’re losing money.” So clear up any high-interest debt before reallocating that money to investments.


As Bola says, “Financial mastery is all about empowering yourself.” Opening a 401(k) or an account with an investment platform is a great start, but you don’t want to leave all the decisions to someone else. “Knowledge is power,” says Bola, “and the more knowledge you have, the more confident you are. Pick up a book on investing and start educating yourself.

Investing 101 with Bola

What is a bond?

“Bonds are ways to diversify your portfolio — it’s an IOU, basically. It’s a way for governments or major corporations to borrow money from you to build roads, for example, or a new research center. They’ll lock in a rate of return over a specific timeline, and that’s where you make money — as a return on your investment. These are usually a safer, more conservative option than stocks, since the government is unlikely to go out of business (if it does, we’ll probably have bigger problems).”

Should I choose an index fund or a mutual fund?

“I recommend index funds and exchange-traded funds over mutual funds for newer investors, as mutual funds are being actively tracked by a manager. That means the fees you’re paying will be higher than in an index fund, which is typically responding to the performance of the economy as a whole. The difference in those fees may seem insignificant, but if you’re talking about investing in the fund over 30+ years, they can really add up.”

How do I rebalance my portfolio?

“Rebalancing your portfolio means reassigning the money you’ve made in the account according to the objectives you’ve set. So let’s say you wanted to have 70 percent of your portfolio in stocks and 30 percent  in bonds, but the stock market over performs and suddenly you have 90 percent of your funds in stocks, you’ll want to sell off some of those gains and put that money back into bonds in order to keep your 70/30 split. I recommend doing this about once a year, just to keep an eye on things.”

Photos by Louisiana Mei Gelpi. Art direction by Emily Zirimis.

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