The Woman’s Guide to Investing in Stocks.

Out of all my friends, there are very few women I know who invest in the stock market, and yet the majority of my male friends play around with stocks and shares. So why don’t women dive in too? Studies have shown that women are more risk-averse and like to squirrel their money away into savings, afraid of their money being stuck in shares for years, or worse, losing everything, while men tend to be more adept at taking risks.

So I’m here today to tell you all about my year of investing, and how you can – and why you should – get started with investing in the stock market for long-term gains!

So, ready to read my womens guide to investing in stocks? Let’s go!

I’ve broken this down into sections to make it easier to understand how to invest in stocks and shares, but if you have any questions please let me know in the comments or on Twitter! The section on ‘how to choose which shares to invest in’ is at the very end of this guide because I think it’s really important you know other things first, before you even start to think about the shares you buy and invest in.

Basically, I want you to learn from my mistakes! Most of this guide is relevant for UK investors only, but some of it is relevant for US investors too – you’ll just have different investment platforms and accounts.

It’s also important to remember that I’m not an expert or financial adviser, just a normal twenty-something woman who works in Tech and wants to share the information she has learnt over her first year of investing 🙂

Also, you might want to settle down with a cup of tea and a biscuit, because this guide is over 5,000 words long (around a 15-minute read)!

Why women should start investing in the stock market

With the bank interest rates decreasing dramatically over the past ten years or so, savings accounts and Cash ISA’s are no longer as attractive as they used to be. My lovely friend Binny Shah, whose career was in investments and funds at HSBC before she decided to blog full-time, has said, “If you have a fair amount of savings you are better off investing it rather than it being held in a savings account with minimal returns as if invested smartly you will make a much higher return.”

In addition, as women we’re already in a lesser position than men from the moment we’re born. Not only do we experience a lifetime of lower wages due to the gender pay gap, but there’s also the gender wealth divide, and we’re also less likely to have a pension or we have a much smaller pension than our male counterparts, due to time taken off work when we have children and raise a family.

Become financially independent

As the grand-daughter and great-granddaughter of two women who were left as single mothers, I’ve grown up knowing that I can only rely on myself to make my own money. Even when/if I eventually find a man I want to spend the rest of my life with, I’ll always still have my own income so if things go wrong I’ll be able to support myself and still live a good life without his salary contributing to my lifestyle.

As an adult, I have never and will never rely on a man for income or financial gain. And you shouldn’t either. It’s 2020, and there’s a special feeling of empowerment in being an ‘independent woman’ with your own money and income, whether it be from an Etsy shop, a blog, your own business, investment dividends, or a high-powered career in the city.

Even if it’s a small amount, it’s better than nothing! Investing in the stock market as a woman can be a smart way to take control and build a pension pot for yourself, as well as make a small passive income through dividends.

In the words of Beyonce herself: “All the honeys, who making money, Throw your hands up at me!”

Also, research has shown that women are damn-good investors, despite just 13% of women in the UK holding a Stocks and Shares ISA.

How to get started with investing in the stock market

I’m a bit of a control freak, and as my company pension is managed for me in a fund, I really wanted an investment that I could manage myself. For this reason I chose a self-select Stocks and Shares ISA, and as such this guide will be about my experience as a female investor with this type of product.

I’ve really enjoyed it so far, and it gives you far more freedom to choose which shares you’d like to buy and when you want to sell them. The only downside is it comes with more risk. Stocks and Shares ISA’s also protect you from capital gains tax (CGT) and dividend tax, so you don’t have to worry about that (I’ll explain about this further down).

Open a Stocks and Shares ISA

I personally use Hargreaves Lansdown, which is one of the largest and most famous investment services. It’s very easy to set up and use and I’m really happy with them, but the fees are quite high, with a 0.45% account fee and a fee of £11.95 per transaction (so whenever you buy a share, you need to add the fee on top, and the same when you sell.)

However my younger brother uses Trading212 – if you use this link to sign-up, you’ll pay just £1 and get a free share worth up to £100, and my brother will also get a free share (sadly I miss out because Hargreaves Lansdown don’t have such a thing haha). Their fees are much lower/pretty much non-existent and so far he’s only said good things about them!

If you use Trading212 though, make sure you do some research on buying fractional shares if you’re thinking of buying any (HL don’t allow the buying of fractional shares, so I don’t have experience with them).

Whoever you decide to go with, set up a Stocks and Shares ISA, and then any profits (and dividends too) will be tax free. The S&S ISA works the same way as a Cash ISA and Lifetime ISA in regards to tax, so your £20,000 limit is split across all of your ISA’s, meaning in a single tax year you can – for example – transfer £12,000 into a Cash ISA and £8,000 into a S&S Isa, or £5,000 into a Cash ISA, £12,000 into a Lifetime ISA and £3,000 into a S&S ISA, and vice versa etc. It just can’t go over £20,000 across all of them otherwise you’ll have to pay tax on the interest and profits.

Investment funds

I haven’t set up any investment funds myself because like I said before, my company pension is automatically in a fund scheme managed through Aviva – it’s one I’ve had for years and I take it to each company I work for as it’s a great account that was set up by the second company I worked for after I left university.

However, Binny says, “My advice if you’re a first time investor is to diversify your portfolio as much as possible between different sectors as well as between stocks & shares/ETFs and Funds so you have a mix of short term and longer term investments.”

So if you currently don’t have any investments or a pension that’s a managed fund, then it might be a good idea as a woman investing in stocks, to look at investment funds as well as investing in individual stocks and shares.

Terminology: Stocks vs Shares

Stocks is the term used to describe partial ownership of one or more companies. I.e. “I invest in stocks.” or “My stocks are doing well right now”

Shares is the term used to describe partial ownership of a specific company. I.e. “I have shares in GSK.” or “My shares in BooHoo are doing great right now!”

Important things to remember when investing

Before you begin investing in stocks, there are a few things I think are important to remember:

Public vs private company

As a beginner it’s best to stick to investing in a public company. A public company (for example, Microsoft) is a company that is listed on a stock exchange, and a private company (for example, Monzo) is a company that has private investors and although you can buy shares in that company, you can’t buy them on a stock exchange. An IPO (Initial public offering) is what happens when a private company becomes a publicly listed company.

Only use money/capital that you can afford to ‘lose’

While you’re practising and starting out, you should never, ever, use your entire life savings. You should only use money (aka, capital) that is disposable to you. And this should be obvious, but never take out a loan to put into the stock market! Ever!

Even when you get the hang of investing, you still shouldn’t put all of your life savings into stocks and should always have your money split between different accounts. Cash ISA savings should be short-term savings (like a house deposit, renovations, or emergencies), and S&S ISA should be more long-term (like retirement or something else that’s 10+ years away for you).

Personally, I split my monthly paycheck into different savings accounts. I’m very fortunate that I have a substantial income, and even though I live and rent in London I save around 50% of my income each month (unless I’ve had a holiday or big expense or something that month). But honestly, even if you can only afford to save 10%, or 20% of your salary each month, it’s better than nothing and it all adds up over time, so it’s still worth doing!

I have a separate company pension where 12% of my salary is paid into my pension from my company, and then I put 60% of my total personal savings for that month into a Cash ISA (which is my house deposit fund), 20% into my Stocks and Shares ISA (aka, essentially another pension to me), and 20% into my emergency fund (for emergencies like if I were to lose my job tomorrow but still had to pay rent). The money I put into my S&S ISA just sits there in the account, I don’t invest it straight away/each month.

By doing this I then already have the funds sitting in my Stocks and Shares ISA, so that I can immediately buy the shares I’ve been keeping an eye on if the price gets down to a price that I’m happy with. Once I’ve purchased shares, I then essentially count that money as gone and non-existent – I let it sit and leave it alone like I do my pension. Which leads me onto…

Treat it like a pension – investing is different to trading

This is investing, it isn’t trading. I’m not purchasing shares with the aim of selling them in a few days, weeks, or months. I’m purchasing these shares to sell in 30-40 years time when I’ll be retiring and want to retire with a nice nest egg.

If they increase dramatically in 15-20 years time then I’d consider selling some and reinvesting into something else, but it’s important to keep the mindset that this is a long-term investment. Ideally I’d like to retire as early as possible, and hopefully investing in the stock market will help me do that so I won’t have to work until I’m in my sixties!

Take Warren Buffett’s advice:
“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for ten minutes.”

So, if you’re reading this guide because you’re a woman interested in trading, then this woman’s guide to investing in the stock market is not for you 😉 trading is much riskier and requires a lot of time each day, which is why it’s a full-time job done by traders with many years of training behind them.

Valuable lessons I’ve learned as a woman investing in stocks

One of the things I didn’t do, that Binny advises, is to trial investing by using “a virtual portfolio to understand how it all works.” It’s worth doing this before you put real money into investing, so you can practice a bit and just get your head around it all. The London Stock Exchange allows you to do this, completely free of charge, as does Market Watch.

When you do start investing for real, one thing I learned very quickly, is don’t buy shares when they’re on a steep upward trajectory! I made this mistake once because I was impatient and panicked that it would go up even higher, and subsequently lost about £300 over the next few weeks as it dropped down.

It still hasn’t recovered as obviously the coronavirus pandemic has now made it worse *hand-forehead*. I have learnt from my mistake though and will never do that again! Now I only buy stocks when the price has dipped. One thing Warren Buffett has said is, “Remember that the stock market is manic-depressive.” aka, it’s constantly going through ups and downs. You need to buy in those downs and sell in the ups.

It’s also important to remember that you only lose money if you sell your shares in that company. If you keep hold of them, who knows, maybe in 10-20 years they’ll recover and you’ll make money on them even though they dipped dramatically at some point due to a recession or global pandemic!

But also, if a company are doing consistently badly over a long period of time, something is clearly wrong and it might be time to cut your losses, sell the shares and reinvest them into something that could start making you money.

Do your research. Research the company until you are certain you’re making a good investment and it will grow and increase in value over time. Look at ALL the graphs and trends.

Don’t worry if you make mistakes – learn from them

You’ll win some and lose some. Not all shares will make you money; some companies will go bust, some will go through really tough periods, and some will just remain quite level over time. Personally I’ve tried to invest in reliable shares that are guaranteed to either pay a steady dividend and/or grow over time.

Also, as a newbie woman investing in stocks, I’d suggest you avoid AIM stocks (a sub-market of London Stock Exchange). Stick to the main stock exchanges like LSE (London Stock Exchange) and NYSE (New York Stock Exchange) etc. AIM is for small, growing companies and is super risky.

I actually made quite a bit of money on it, but I also lost a load too as the market is so volatile, so eventually it evened out. If I’d just put that capital into blue chip companies I would have had dividend payments and there would have been a higher chance of them growing over time (and less stress, haha).

Understanding dividends – create a passive income

Dividends are one of the main reasons for women to invest in stocks and shares. A dividend is a payment from a company you hold shares in, as a reward for putting your money into the company.

Not all publicly-listed companies award dividend payments, so when choosing which companies to invest in you should look at whether they pay a dividend and at what percentage. It’s a form of passive income that can build up over time and be useful as an extra bit of income.

The dividend yield and what to be wary of

The dividend yield is a financial ratio of the value of the shares you hold which is expressed as a percentage. A lot of older companies pay dividends to shareholders, and the percentage varies widely but is usually between 1%-10%.

Typically, if a dividend yield is much higher than other companies within the industry, it’s actually seen as a red flag and you should be wary of investing in the company and do thorough research. Anything over 8% should be researched thoroughly! Most companies pay dividends out each quarter.

Additionally, a high dividend could indicate that a dividend cut is coming soon, so never buy a stock just based on it’s dividend yield – you should do enough research that you’re confident that it’s worth buying for long-term growth as well as the dividend.

Ideally you should have a variety of stocks, with a mix of older companies that pay a dividend, and younger companies that don’t pay a dividend but are currently fairly cheap because they’re still growing.

It’s also important to be aware that dividend payments are usually very small unless you have tens of thousands invested in a company, but it’s a good idea to slowly build up your portfolio over time so that in 30-40 years time you could have tens (or hundreds!) of thousands of pounds saved in a Stocks and Shares ISA, and will therefore get a significant passive income paid each quarter through your dividends.

Just don’t expect to make bank through dividends within the first few years until you’ve built up your portfolio and have a decent amount invested – but every little helps and compound interest is vital to growing your investment (see below).

How dividends are paid out

So what do you do with those dividends? I personally chose the option in my Hargreaves Lansdown account to keep my dividend payments in my Stocks and Shares ISA so I can reinvest them, that way you reap the benefits of compound interest (which is how Warren Buffett became so wealthy – you can read more about that here).

I also recommend you read this article about compound interest. Additionally, if you keep your dividend payments in your Stocks and Shares ISA, you don’t pay any dividend tax on them!

How to choose which shares for women to invest in!

Finally, we are at the main section that I bet you’re all here for! Choosing shares to invest in requires time and patience, a lot of research, and a level head. And always choose quality stocks over cheap ones (I’m looking at you, Metro Bank, you cheap rascal). I actually find it really fun researching companies and deciding whether to put money into them, and it’s even more fun when it starts to pay off!

Last summer I invested a small amount into BooHoo. It’s a company I haven’t bought many products from as I feel it isn’t really aimed at my age group and is more aimed at Gen Z, but I knew it had been doing well and after doing a lot of research I decided I wanted to invest in it.

Since then the shares have increased in value by over 30%, despite the coronavirus pandemic! If I had left that money in my Cash ISA, it would only have made me 1% profit!! Do you see now why investing is a good idea?

A lot of it is about timing, your understanding of a company’s performance, and the level of research you do. Here are a few tips that have helped me choose the shares I invest in:

Create a spreadsheet and a strategy

I find it really helpful to create a spreadsheet detailing the shares I currently own, and the ones I’m keeping an eye on. I’m a Type A person, so everything is colour coded and incredibly detailed. I also find it useful to keep a note of the lowest price I’ve seen the share since I started watching it, and that way if it dips below that I know it’s likely to be a good buy depending on what’s happening with the company and market.

My spreadsheet has columns for each of the following: Status (whether bought or watching), Investment Name (aka, name of company), Dividend Yield %, Market Sector, Rate Bought At, Amount to Invest (so I type in the amount I want to invest, say £500), Total Amount Paid (inc fees), Share Amount (so whether it’s 1 share, or 1,400 shares in the company), Current Rate, Current Share Value, Growth %, and Total Dividends Paid.

You don’t really need the ‘Current Rate’ and ‘Current Share Value’ in the sheet because it lists that in your investment service dashboard, but I just like to keep an eye on it all (like I said before, Type A, haha).

In my spreadsheet I then colour code my ‘watching’ companies, so I have bright yellow for ones I should buy as soon as they dip, and then a pale orange for companies that I’ll keep watching but aren’t as much of a priority as the bright yellow ones. Basically, bright yellow equals the ones I REALLY want…but only when they’re cheaper 😉

Research and read useful websites

Before choosing the companies you want to invest in, do your research! I can’t stress this enough. While men can ask their friends for recommendations because so many of them invest, women investors are at a disadvantage.

So, look at everything; the company accounts available, balance sheets, profits, any debt the company has, and you should even research the CEO, founders, and chairman and their track record. Literally, research as much as you can.

My favourite websites for tips and news are: ft.com, Market Watch, and The Motley Fool (although don’t take everything they say as gospel and always do your own research!) When researching a company I also use Proactive Investors for company news, and Simply Wall St for company info as it has really amazing information and is very simple and easy to understand with their eye-pleasing graphs and charts etc.

Invest in what you know

Only invest in companies you understand and/or have the time to do full and extensive research on. Investing takes time, so start off with companies and industries you understand and use/love yourself, and as you progress and get to grips with it all, you can start branching out into other industries.

For example, I’ve never invested in a housing or construction company because I know zero about housing or construction and have never had any experience with them either as a consumer or in business. Whereas I understand banks and retail to a certain extent as I’ve had huge work clients in both of those industries, as well as using them as a consumer.

But, diversify your portfolio to a certain extent

The general advice – and certainly the advice in this womens guide to investing – is to not invest in more than 15-30 companies. Any more than that and you’ll be spreading yourself too thin and it’ll be impossible to keep track of them all and how they’re performing, their latest news, and what’s happening within the company.

But as Binny said further up, with those 15-30 companies, make sure they’re diverse and a range of industries. I personally have shares in everything from retail to oil, and pharmaceuticals to banks. And don’t forget about the unsexy but reliable stocks!

UK vs US stocks

UK stocks are typically much cheaper than US stocks, and so far my UK stocks have actually performed far better than my US ones, but that’s mostly because I bought them last year and then coronavirus hit.

It’s a good idea to hold shares in both UK and US companies just to diversify a bit, and you can buy US stocks the same way you can buy UK ones and there are no extra fees for doing so, you just have to pay US taxes on the dividends and interest earned from the US stocks (NOT the UK ones). And remember to consider the exchange rate when buying and selling.

With US stocks you’ll need to fill in a W-8ben form for tax purposes, which will get you a reduction of taxes on US dividends and interest (typically it’ll be reduced from 30% to 15%). You’ll find the form in your trading account, and the company you use may even prompt you to fill it in.

Don’t take too much notice of past trends

Hindsight is a beautiful but really annoying thing (WHY did I not buy more Bitcoin back in 2013 *cries*), and while past trends can help you to make an informed decision when choosing which companies to invest in, don’t use that alone to determine your choice. A company might have had a high share price in the past, but there’s no guarantee it will return to that. Do. Your. Research.

How much should women invest in the stock market?

With Hargreaves Lansdown the absolute minimum I would personally invest in one company is £200, as I found when I was practising with smaller amounts that any less than that and it isn’t really worth it due to the fees. But if you use a different investment platform such as Trading212 that has lower/no fees, you’ll be able to put in smaller amounts such as £50 or £100 and you’ll still be able to make money over a long period of time as it grows.

As you become more confident and if prices drop further, and if you can afford it, you can then put much larger sums of money into companies.

As a newbie, after practising using a virtual trading platform like the ones mentioned above, I’d suggest starting off with investing small amounts in 2-5 companies just to get used to it all. As you become more experienced and confident and you get the hang of using real money, you can gradually up the amount you put in and the number of companies you buy shares in.

A lot of people think that investing is only for people with lots of spare cash lying around, but just remember that £200 in a company is better than nothing at all, and over time you can add to it each time there’s a dip in the market and as you grow in your career and earn more money. The stock market offers the potential for much higher returns over the long-term than a low-interest savings account, so we need to start using that and saving for a better financial future for ourselves.

Ultimately, as a woman investing in stocks, you really need to invest an amount that you’re happy with. Of course a lot of it depends on what you can afford to ‘lose’ if things were to go wrong. I know that things are tough these days and with many of us struggling to buy our own homes, investing as a woman isn’t seen as a priority as saving for a deposit or another big thing (a lot of my female friends are looking at egg freezing, which is super costly!) usually takes precedence.

But remember that the sooner you start investing the sooner it will grow and in 30 years time you’ll be so thankful you started, even if you started small and built it up slowly!

Stop losses

A stop loss is when you set your account to automatically sell your shares in a company if the share price dips below a certain amount. A lot of people advise this to mitigate risk, however I don’t personally use them.

The reason I don’t use them is because if a global pandemic, or a recession, or any negative company news was released, the share price could dramatically fall, triggering your stop loss and all of your shares would be sold. But what if the price then jumped back up the next day? Or a few weeks later? You would have sold for nothing and lost money when you didn’t need to. I would rather keep a close eye on everything and make an informed decision, rather than panicking and selling automatically when you don’t actually need to.

Binny says, “Never panic sell if the value decreases in one of the stocks you’ve invested in due to volatility in the markets. It will go back up at some point so hold tight!” She also goes on to say that stop losses can actually be worthwhile in some scenarios when the market is less volatile, and the option to set a stop loss should be chosen on a stock by stock basis, especially “if it is a particular stock that has a lot of negatives around it and is unlikely to recover within the short to medium term.” she also advises, “I would set the price at a comfortable level to not make too much of a loss.”

Download the Bloomberg app

I absolutely love the Bloomberg app for keeping a track of everything day-to-day. You can add in your current investments and all the details, and it shows you every day whether they’ve increased or decreased, and it also shows you the total gain or loss over time. As well as that, you can have different ‘lists’, so I have one with my investments and one with the companies I’m keeping an eye on. It’s basically a slightly less detailed, but real-time version of my super spreadsheet!

AND they serve you specific news related to the companies on your list so it’s all there all nice and neat! It’s also free, you just have to pay if you want to see more than a few of the news articles a month. I find that the headlines and excerpt are enough to give me a good idea though, and then I just Google for more in-depth info from a variety of different sources.

Keeping an eye on company activity and forums

The investing forums such as London South East etc are something I’ve found quite difficult to take part in so far. I tend to lurk, mostly because they’re full of men and a lot of them sound like arrogant nobs. I’ve found it quite difficult as a woman investor to read the forum threads and every time I see a post saying “This is it lads!!” or “Come on boys!” I just want to post saying “NOT ALL OF US ARE MEN!”. But I don’t because I’m not afraid to admit that I’m slightly intimidated. Also some of the people on those forums just sound dumb AF and should not be investing.

Anyway, I use the forums to keep an eye on general thoughts and commentary, but don’t take too much notice of them and take every post on there with a pinch of salt as a lot of stuff on there is just speculation. An important thing to look out for though are company announcements such as RNS’s. These provide updates, and sometimes they can impact the share price. As I said before, Proactive Investors is a great site for seeing the latest company news! However, even if news impacts the share price negatively, it’s always important to hold onto shares if these updates won’t impact the long-term value and potential of the company.

Tread carefully with buying during the pandemic

It’s very important to tread carefully right now with the coronavirus pandemic. It’s definitely a great time to buy certain stocks as a lot of them are cheap right now due to the market crash, but keep in mind that many companies will not survive this pandemic, so choose wisely and go for safe, strong brands and companies.

Warren Buffet for example, sold ALL of his US Airline shares recently, so even though the airline stocks are super cheap right now and might seem like a good buy, it’s probably not the best time to buy them. You should think of things people always need and use; banks, supermarkets, utilities, personal care and consumer goods, pharmaceuticals, technology etc. Go for the best and strongest long-term contender out of your chosen industries, ideally blue chip companies that have longevity and have been around for years.

The next six months or so will have a big impact on the markets, and we don’t know whether they’ll bounce back or continue to decline for a while longer. I’ve been buying up a few that I’ve been waiting to drop, but there are some more I’m still waiting on as I feel the market may drop further for certain industries after Q3 reports are released towards the end of the year.

You don’t have to be a genius to invest in the stock market

You really don’t have to be a genius to be a woman investing in the stock market. You just need to do your research and due diligence, and put in the time and effort. You need to be patient, level-headed, and don’t make any rash and panicked decisions. It can be really daunting starting an investment strategy as a woman, but I promise it gets easier over time and with a lot of research and due-diligence, it can be really fun and an interesting way to learn more about the economy and nurture new skills!

Women investing in stocks – Further Reading

I thought I’d list some great articles I’ve found on female investors, as well as a few investing books that I’ve found useful (sadly many of these are written by men, but the first book on the list was written by a woman), and a link to Warren Buffett’s letters (also, if you’d like to take a look at a UK investor and fund manager who has been super successful, have a Google and do some research on Nick Train and Mike Lindsell from Lindsell Train).

Articles on Female Investors

• Wharton Magazine – Why Don’t More Women Invest In The Stock Market?
• Stylist Magazine – Why aren’t more women investing?
• The Guardian – Why women need to stop saving their cash – and start investing
• FT – Do women really make better investors than men?

Useful Books on Investing (Please note: this section uses affiliate links)

Download the Kindle app and get a 30-day free trial, or purchase the hard-copy version of the books:

• How to Make Your Money Last – this is very US focused, but is still worth reading!
• Smarter Investing: Simpler Decisions for Better Results
• The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns
• One Up On Wall Street: How To Use What You Already Know To Make Money In The Market
• Intelligent Investor: The Definitive Book on Value Investing – this is by one of the most famous investors

Warren Buffet’s Letters:

And finally, you can read through Warren Buffet’s letters to shareholders which are both insightful and valuable, especially to see which companies he owns shares in.

 

Disclaimer: As I said at the start of this post, I am not a financial services professional. None of the shares mentioned in this post are recommendations to buy, and you should always *always* do your own research. Remember that nothing is guaranteed, and you could potentially lose money depending on the companies you choose to invest in and the time you buy the shares. Also a huge thank you to Binny for providing her helpful and professional comments!