Blog | Personal Finance

Women and Investing: The Upside and Downside of Fear

Don’t let this four-letter word hold you back: here are 4 reasons why you should embrace fear, plus 3 ways women can build the confidence they need to start investing

Summary

• Investing for women doesn't have to be scary; let go of the fear

• These are the tips you needed to build confidence for investing

• Investing for women is easy once potential is realized

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What would you do if someone handed you $1,000 in cash right now, no strings attached? You could do whatever you want with it — there are no rules. Would you buy that designer handbag you’ve always wanted? Would you put it in your savings account? Would you buy some silver? Would you launch a home-based business? Would you pay off some debt?

Lexington Law asked people this very question: What would you do with an extra $1,000 in cash. The answer? Men are 35 percent more likely than women to allocate the money for savings or investment; women are 43 percent more likely than men to allocate the money to paying off debt.

For decades, women have been labeled as savers rather than investors. Unfortunately, that means they are just sitting on the sidelines in cash — and, despite what you’ve heard or learned, cash is highly unlikely to put you in the position needed for retirement.

In this day and age, there’s just no way you can save your way to a comfortable retirement. Why? Because people are living longer (and women, often outlive men), healthcare is more expensive, and the money you’ve been able to sock away in your savings and 401(k) won’t be nearly enough to cover everything without drastically reducing your expenses.

And is reducing your expenses really the way you want to spend your golden years?

This begs the question: what is holding women back from making different financial choices than the expected?

More often than not, the answer is rooted in fear.

Is fear an asset or a liability?

Whether you’re afraid of heights or terrified of public speaking, we’ve all experienced fear at some point in our lives. Perhaps it’s prevented you from trying a fun activity like zip-lining or kept you from making a presentation that would have resulted in a promotion. And when it comes to finances, fear can really impact one’s decision-making abilities.

A lot of first-time investors ask for tips to overcome their fear. And guess what? It’s normal to be scared to death when it comes time to buy that first rental property or to invest in that first business. Anytime you commit your hard-earned money to an investment, it can be scary!

But is fear an asset or a liability? Let’s examine both sides of this confusing emotion.

The best things about fear

Fear exists within us for a reason — it alerts us to possible life-threatening situations, like hearing a strange noise late at night or while walking alone in an unsafe neighborhood. Fear could very well save your life because it makes you alert and makes you more cautious. Fear can also motivate us to take one extra look at the numbers on that rental property or to tune in to the special TV report about the industry in which we just bought stocks. As such, a touch of fear can help us avoid costly mistakes. A certain amount of fear can serve us well in life.

The worst things about fear

If you’re not careful, fear can have a destructive side as well. It can kill your dreams, opportunities, personal growth, passion, and your ability to live your life to its absolute fullest. The harmful face of fear is when it paralyzes us. When we’re immobilized into doing nothing. When we say “no” to the opportunity automatically, without even thinking. Fear makes it far too easy to fixate on all of the reasons why the investment is a bad, risky and unwise venture to undertake. Fear can also turn into an excuse that prevents you from doing something unknown or outside your comfort zone. When the fear of making mistakes, of losing money, of embarrassment or of personal disappointment wins, you lose.

4 reasons why every woman should embrace fear

When was the last time you embraced fear? Even appreciated it? Most women do everything they can to avoid doing the things that scare them most. Fear, after all, is a very uncomfortable thing; which is why we avoid situations that trigger fear.

But is avoiding fear the right thing to do?

In an interview with the "Harvard Gazette," Susan Hunt Stevens, the co-founder and CEO of a company called WeSpire, had some wise words for female entrepreneurs, "Just get used to the fear. There is constant fear. But it's so much fun, the fear kind of motivates you."

That is wisdom not just for entrepreneurs but also for all women who want to grow in life.

It can be said that when it comes to big life decisions, if you are feeling afraid, you're most likely facing down something incredible on the other side. The points in life where one grows and achieves the most are also the times where the most fear exists. Once we face down that fear, the sweetness of victory or the lessons learned from failure are priceless.

At Rich Dad, these are the the four key functions we’ve identified that fear plays in a woman's path to success:

1. Embracing fear is how you grow

   Fear can be the greatest asset you have. Every time fear comes up, and you’re clear it’s not life-threatening, that means you have an opportunity to grow and to expand yourself. In fact, as mentioned earlier, it’s often through this type of agitated process that one grows the most. And when you come through the other side, it’s incredibly exhilarating! You are not the same person you were before the process. Instead of dreading fear, look it straight in the eye and know you’ve just uncovered your next level of growth — if you so choose to seize it!

   Perhaps Ralph Waldo Emerson said it best: “He who is not every day conquering some fear has not learned the secret of life.”

2. Fear creates a decision point

   Because fear is uncomfortable, no one wants to stay stuck in it. When you feel fear, you know you must make a decision. Either you'll push through the fear and accomplish more than you ever expected, or you'll back down and return to what is comfortable. In either case, it forces you into a decision.
   The good news is that if you understand the dynamic of fear, you have power over it. When you realize that you are at a decision point, and that you, not the fear, are in control, you can choose to walk into your fear and discover what is on the other side.

3. Fear stretches you further than you thought you could go

   By nature, we're creatures of comfort. The adage, "stuck in a rut," refers to how deer will take the same path to water from the woods over and over again, creating a rut over years. They don't ever take a different way because the rut works just fine for them. But if they come to believe the path is now dangerous, they will find a new path.

   In the same way, we often get stuck in the rut of safety and security. When this happens, we don't change and we don't grow. Rather, we atrophy.
   If you want to grow to be more than you are, you need a little fear to shake things up and set you on a different path. Thankfully, it's exhilarating when this happens — if you're willing to embrace it.

   The best part? The more you grow, the broader your horizons get and the less likely you are to return to old ruts!

4. Fear makes you feel alive

   Thea Jourdan once wrote for "Netdoctor," some of the benefits of fear: “Fear actually does have a profound physiological effect on the body, which evolved to help us in a 'fight or flight' situation.”

   The article goes on to quote Dr. Louise Selby, a GP based in Guildford, Surrey: “In the first few seconds, adrenaline levels soar — leading to a state of heightened alertness and the muscles are primed for immediate action. The heartbeat quickens and the rate of breathing accelerates. As soon as the fear diminishes, it's replaced by a sense of powerfulness and euphoria, which can be addictive.”

   Under the right conditions, fear makes you feel more alive than you ever have — especially when you conquer your fear and take a leap of faith! The sense of accomplishment that comes after facing down your fear is irreplaceable, and it makes you all the more ready to take down your next challenge.

How women can overcome fear of investing

When it comes to investing, it often means stepping into the unknown. For many, it’s about doing something that’s never been done before - there is no experience, and very few answers; so it’s no wonder the fear sets in.

The following are three ways that women can build the confidence they need in order to invest their money effectively for the long haul.

Most people only think of paper assets when they think of investing. Unfortunately, for most women, this means giving your money over to a broker and hoping it is invested well, all while racking up fees, even when you’re experiencing losses.

But there is a whole world of investing options out there both within paper assets and elsewhere that you can and should explore. Once you know that these four, very distinct, asset classes exist, you can begin to home in on what you are most interested in and then dig deep into that area to learn as much as you can.

After some research and maybe even some first-hand experience, you’ll learn which asset class is right for you.

As the old saying goes, with knowledge comes power. Once you are armed with the knowledge you need to invest wisely, you’ll begin to build the confidence you need to get in the investing game.
The good news is that investing in financial education has little risk and a huge upside. It costs a little bit of your time. Begin by reading books, attending seminars and free classes, and reading the daily financial news to connect the dots. It’s that easy to start.

1. Invest in financial education

   Putting your money out there can be a scary proposition. No one wants to make a gamble and then lose all that hard-earned cash you’ve built up over the years on a bad investment.
   So, a great place to start investing is in your own financial education. What does this look like?

   It starts with understanding that there are four distinct asset classes:

   • Real estate: Real estate investments either provide cash-flow from rental properties (the overage you make each month from rent once all your costs are paid) or capital gains (a one-time profit from buying and selling a property).

   • Business: Within this class, there are two routes to take: 1) invest in your own business or 2) invest in someone else’s private business or company. The goal is to generate a return back to you.

   • Commodities: Commodities include metals (gold, silver, copper, etc.) food (grains, corn, coffee, and sugar) and raw materials (oil, gas, cotton, etc.).

   • Paper assets: Paper assets include stocks, bonds, mutual funds, real estate investment trusts (or REITs), exchange-traded funds (ETFs), and retirement accounts where you can invest in stock options, stock futures and foreign exchange.

2. Find a mentor

   At Rich Dad, we’re huge proponents of not only building your financial education but also getting a mentor who can help guide you as you build your financial IQ. No woman is an island unto herself. You need a community of people to help boost your self-confidence and achieve your financial independence.

   Join an investment club and start meeting with people who are like-minded when it comes to money and investing. You’ll be surprised at how much you start to pick up along the way.
   And with the right mentor, you’ll have someone to bounce ideas off of and gain insights from when you don’t have enough knowledge on your own to make the call. It’s an investment in relationships that pays off big time over the years.

3. Get a small amount of skin in the game

   Kim Kiyosaki’s first investment was modest by any measure: a small two-bedroom house in Portland, Oregon. At the time, it seemed like a huge leap of faith, but in reality, the potential for loss was very small, just a few thousand dollars.

   She made $25 a month in cash flow, but it was the sweetest $25 she ever made. Finding that little house instilled love for the hunt for Kim. It also gave her a much-needed boost in self-confidence. What she learned from that investment, however, was worth infinitely more. And the confidence she gained allowed her to move on to a new, slightly larger investment down the road.

   

   Today, she owns thousands upon thousands of apartment units across the U.S., but she would never have gotten to this point if she hadn’t taken action and invested in that small single-family home in Portland many decades ago.

   Another option would be to invest in a small amount of silver — for just about $33 today, you can buy one ounce of silver and immediately become an investor.

   With the right investments in your financial education and by finding the right mentors, it becomes easy to take this step of putting your money where your mouth is. Then, slowly but surely, you’ll begin to build the confidence you need to make bigger and bigger investments.

Investing is truly a process that you have to take one step at a time. And remember, it’s OK to fail. But it’s never OK to let your fear prevent you from achieving your financial dreams.

So, what fears do you have today? What dreams have you abandoned because the thought of chasing after them was too scary?