19% of women report feeling confident selecting investments that align with their goals
This is a discouraging statistic from a recent survey conducted on women and investing. We know that a gender gap exists when it comes to investing – on average, data shows that women’s investment account balances are less than men’s. There are a few often-cited reasons for this. The gender pay gap still exists, and women statistically spend more time outside of the workforce, meaning that women may simply have less money to invest.
But there is another reason. Women tend to feel less confident taking investment risk and therefore hold more cash on the sidelines, hampering their money’s growth potential.
But there is a difference between taking risk, and taking inappropriate risk for your goals. Women tend to benchmark successful investing not by the return numbers themselves, but by progress towards goals – buying a house, funding an education, or retiring comfortably.
Defining your goals and their timeframes is the first step toward building the confidence to invest. Money that you don’t need for 10 or 15 years can afford to be invested for growth. The farther along the timeline your goal is, the more certainty you can have of capturing greater returns by investing.
When women do invest, they see results. On average, women outperformed their male counterparts by 40 basis points or 0.4% over a 10-year analysis
On the flip side, studies show that over time, women’s investment returns tend to outperform men’s, with women exhibiting less impulsive investment decisions and staying the course when there is market volatility.
Starting early is the most powerful thing you can do to put yourself on track. If you didn’t start early, start now. Women already have the proclivity to stay invested to meet their goals, we just need the confidence to invest in the first place!
I joined Integras Partners in 2022 wanting to broaden my impact on people’s lives, particularly groups that have been underserved by the financial advice community – groups like women and single earners, which I am also a part of. Integras Partners was already well suited to women investors – focusing on the partnership and the “why” behind financial goals.
I’ll be writing more about these areas in coming newsletters, as well as general financial wellness and investing topics that I hope you will find interesting.
Bullish sentiment ran out of steam during Q3 2023. In a previous blog we discussed the primary culprit for that. All that said, we are now in the final quarter of the year. Investors entered October in a pessimistic mood and with lots of cash riding out the storm in money market accounts (earning close to 5%). Historically, the last quarter usually sees the strongest market performance. On the back of some pessimism, we think the stage could be set for a significant catch-up.
We recently increased client stock exposure in anticipation of a rebound. We focused on small and mid-cap companies that have not followed the market-moving “Magnificent 7” (the new FAANG stocks). We are much more comfortable with the potential downside when buying at 14-15 times earnings vs. 35-40 times for the largest tech companies.
We have also recently increased safety within our shortest time horizon “Liquid Assets Strategy” by selling our high-yield bond fund position. We think a credit crunch has begun and choose to hold risk-free cash earning 5% rather than accept the risk of BBB-rated bonds earning 6%.
Economic growth is slowing. Businesses are faced with refinancing debt at much higher interest rates, and rates may remain high for many months. Corporate earnings should stay positive but are still vulnerable. The Consumer is still strong, as are home prices and employment. But leading economic indicators continue to weaken. Investors are having a difficult time forecasting the future. It’s a toss-up as to whether the Fed can engineer the magical “soft landing” markets were certain of just a few short months ago. Market sentiment is terrible, and we view this as an opportunity.
The war in the Middle East is heartbreaking, and we keep the civilians at the forefront of our prayers. The cold calculus of markets and economics is that unless the conflict broadens into a regional affair there should be little impact on financial markets. Should it widen to include Iran in particular, that calculus will change.
There have always been geopolitical events and market uncertainties. Our time horizon strategies coupled with detailed financial planning reduces the impact of market risks on our clients’ ability to live the lives they choose. When investment risk is pushed to long time horizons, growth strategies are allowed to perform their best. Over more than a decade, Integras Partners has successfully navigated tumultuous periods without having to give up exposure to the long-term growth needed in almost every portfolio.
Our structural portfolio design provides the comfort to enjoy life today, recognizing that while markets are inconsistent, freedom to live life isn’t.
Call us to review your investment approach (404) 941-2800.
August, September, and October are historically the worst three months for market performance and 2023 was no different. Everything but cash, oil and short-term treasuries had negative 3rd quarter returns. The S&P 500 lost 3.25%, small caps fell 5%, international markets dropped 3.5%, and long-term treasuries lost an astounding 8%.
The culprit was interest rates. Not just the shortest-term rate that the Federal Reserve controls but also long-term rates, which are determined by bond traders. There were two main reasons that long-term rates went up sharply. First, the Fed made it clear that it intends to hold interest rates high far longer than the bond market expected. Second, with the US fiscal deficit climbing, the Treasury must issue and sell more bonds. Simple supply/demand dynamics resulted in lower bond prices, which pushes interest rates higher. The 10-year US Treasury note began the quarter with a rate of 3.85%. At the end of September, it had risen to 4.8%. Rising rates are bad enough but when they rise at such a fast pace, long-term assets with a yield – dividend stocks, bonds, real estate, etc. – lose value quickly. For example, defensive stocks such as utilities lost almost 10% during the quarter. And since the beginning of 2021, the 20-year US Treasury bond has lost a staggering 50% of its value. All due to interest rates.
Today we are at an interesting crossroads. The Fed may be done (or close to being done) raising short-term rates as inflation is cooling off. But we are not out of the woods yet. We have outlined the signs of potential recession in several past commentaries, and they continue to become more apparent. What’s sustaining our economy is the robust consumer and very low unemployment. Consumers are showing some signs of slowing down, and employers are less eager to hire than just a few months ago. It’s natural that the economy will continue slowing as rate increases keep working through the economy. It will be a close call as to whether inflation can slow to the Fed’s stated goal of 2% before economic growth becomes economic slowdown. It may be several more months before the answers play out.
However, we see some opportunities today. Entering the 4th quarter we updated our positioning into areas where we see that opportunity. Read More . . .
Call us to review your investment approach (404) 941-2800.
The big question for investors now is where to be invested going forward. With the overall market trading at 20x earnings and first half gains concentrated into only a select few stocks, most of the market has been left behind. With the valuations of the high-fliers now in excessive territory, the rest of the market looks much more attractive. Value stocks and cyclicals such as financials, energy, materials and consumer staples are a relative bargain and beginning to see some traction. We have maintained value exposure in all of our strategies, seeing better risk/reward near-term than in large growth. Yet the best longer-term risk/reward is in areas not much investor attention has been paid to in several years.
We see potential in sectors and industries left behind in this tech-centric advance. The relative weaker performance of small cap companies to large caps appears to have begun unwinding. We have meaningfully added to small caps in recent months. Today, foreign markets are most attractive as they are generally at lower P/E ratios, and with virtually all regions (except Europe and Japan) growing faster, they offer better value. Plus, when the Fed stops hiking rates, the U.S. Dollar should weaken relative to foreign currencies, which enhances foreign markets’ performance in dollar terms.
We stay focused on what we can control and seek the best longer-term opportunities for growth. The impact and mistakes made during and after the pandemic continue working themselves out. This is a perfect example of the cyclical dangers we work to avoid with our time-appropriate strategies. For our clients with current income needs, we maintain a sufficient level of conservative assets to withstand periods of market weakness until the tide ultimately turns higher. With shorter-term needs funded, longer-term capital can remain invested for growth, and fund future goals. This is part of each client’s personalized investment structure. We like to tell our clients to go live and enjoy life, because we’ve got their backs!
Meet Megan. She’s in her early 30s, single (for now) and fairly stable in her career, although she may change employers.
Like most younger professionals we work with, Megan was unsure how to get started. She had a couple of previous company retirement accounts and a Roth IRA she started years ago. She had accumulated a sizable bank account but was unsure how to invest, especially after seeing her parents experience mixed results.
Integras Analysis
Our conversations determined that she was living within her means, needed a cash “safety net” (for unexpected car repairs or job search) and besides retirement hopes one day to start a family and own a home.
Recommendations
A modest increase to her retirement contributions, to better fund her primary goal, retirement. A 2% increase for someone earning $100K typically lowers bi-weekly take-home by about $50
Set aside a “safety net” savings account for unexpected expenses
Allocate her remaining cash into two strategic accounts. First, a moderate account seeking 4% to 5% returns for goals in the next 3-5 years. Then, a growth account seeking appreciation over the 5-10 years it might be before settling down
Consolidate her former company plans
Results
With her “safety net” in place, Megan started an automatic bank draft of $100/month to her moderate account and is comfortable making the monthly maximum (currently $500) to her Roth IRA. Besides tax-free growth, once you’ve owned a Roth for five years you can withdraw up to $10,000 without penalty towards a first-time home purchase!
We consolidated her former company plans and helped allocate her current employer’s 401(k)
Now, her retirement investments complement each other, and she has a track to meet her primary goal
