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With decades of investing experience as a portfolio manager and university instructor, I’ll answer the question: where should you invest to get good returns? Investing is straightforward and accessible, and the same simple strategies work well for women and men.
Many women worry more about risk and report lower confidence with money, even though research shows women often outperform men as investors. Once you learn the basics, investing becomes much less intimidating. Put fear aside, learn a few key rules, and start building your financial future.
Why stocks matter
Over the long run, stocks have delivered the best returns. From 1973 through 2022 the S&P 500 averaged just over 10% annually, while bonds returned roughly 6% and cash about 2%. But those long-term averages hide big down years and lots of volatility. From 2000 to 2022 the market’s annual return was closer to 6.2%, well below the long-term average. That’s why it’s important to be prepared for ups and downs.
Most investors don’t capture the market’s long-term returns because they trade too often. Fear and greed lead people to sell during downturns and buy near market peaks, a behavior shown to harm returns. Active managers also rarely beat market indexes once fees are included. While a few investors have been extraordinary, expecting to beat the market is unrealistic for most people.
A simple, effective approach
Because it’s so hard to beat the market, the best strategy is to use diversified, low-cost funds and to stay the course. Key rules:
1. Invest for the long term. If you can’t leave money in an index fund for at least 8–10 years, don’t invest in stocks. Short-term returns are unpredictable; long-term ownership captures growth from companies over time.
2. Keep costs low. Fees are taken year after year and compound against you. Choose the cheapest index funds or ETFs available. For example, some broad-market ETFs charge as little as 0.03% annually compared with category averages around 0.33%.
3. Don’t try to beat the market. Accept that outperforming broad indexes is unlikely. Build a portfolio of diversified, low-fee funds instead.
4. Set your asset allocation based on risk tolerance. Divide your portfolio between stocks and bonds to match how much volatility you can accept. More stocks mean higher potential returns and more ups and downs; more bonds mean lower volatility and lower expected returns.
5. Stick to your plan during downturns. Selling when markets fall locks in losses and means you must be right twice—when you sell and when you buy back in. Staying invested lets you benefit from recoveries.
6. Get help when needed. Financial advisors or robo-advisors can help set goals and manage portfolios. Low-fee robo-advisors and fee-only planners are good places to start.
How to become a millionaire
If you start investing at age 40 with no savings, you can still reach $1,000,000 by 65 by investing about $1,236 per month in a mix of U.S. stock, international stock, and TIPS funds and assuming historical returns of about 6.9% annually. If you start at 25, the monthly amount needed drops to roughly $385. Employer contributions to a 401(k) reduce the amount you personally need to save.
Practical portfolio ideas
A simple, diversified portfolio could be 70% global stock ETF and 30% broad bond fund, adjusted for your risk tolerance. For long-term growth in a Roth IRA or taxable account, broad ETFs like a total U.S. market or all-world ETF are solid choices. If your employer offers a 401(k) or 403(b), use it and pick low-fee target-date funds or passive index funds.
Women tend to invest more conservatively and prefer diversified, low-cost strategies, often using advisors or target-date funds. That approach aligns well with long-term success.
Final thought
Fear about investing is normal, but it shouldn’t stop you. Start with a clear plan, choose diversified low-cost funds, stay invested through ups and downs, and get help if you need it. Small, consistent steps today can lead to a secure financial future.
