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This podcast is for education and entertainment purposes. It's not financial advice and doesn't take into account your objectives, financial situation or needs. You should consider if the information in this podcast is appropriate for you and contact a professional financial adviser. If you are seeking financial advice. Hello and welcome to Episode eight in Women's Financial Empowerment, a podcast series from Teachers Mutual Bank.
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In this final episode, we'll be taking a look at women and investing and what women can do to build their financial security. But before we get started, we'd like to acknowledge the traditional custodians of the country throughout Australia and their connections to land, sea and community. We pay our respects to their elders, past, present and extend that respect to all Aboriginal and Torres Strait Islander peoples.
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So I'm your host, Nicole Banks. And joining me again today is Betsy Westcott, my co-host for this fabulous series. Hi, Betsy. Hello. But his greatest wish is that every Australian enjoys financial well-being. She believes the more skill and knowledge we have around money, the better choices we can make to live a happy and independent life. That's why she's dedicated her career to helping people make the most out of their money.
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Betsy holds qualifications in financial advice, home lending and money coaching. Betsy, welcome back. Our last one. I know and one of my all time favorite topics. It's great to be here, Nicole. I'm super excited about talking about investment because it's about growing our money. So today's episode is about women and investing. In this episode will explain and break through some of those supposed barriers to women and investing.
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We're going to discuss some investment options, which that's exciting to me to hear about those options. We're going to talk about the tradeoff between risk and return and she's going to show you how to guard against scams. That's a really important one as well, because investment scams are on the rise. So, Betsy, this is something that's really close to your heart, isn't it?
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Absolutely. I have three rules for money. Make money, keep money, grow money. And investing is all about how do we grow that money? And it's interesting to me as women, we often make great savers and we're often very proactive and at the forefront of making financial decisions in our household. But then they just seems to be this old fashioned view that women aren't that great with investing, and it's something that men do not women do.
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And there's absolutely no reason to believe that women, in fact, make great investors. And a lot of women are like, you know, I'm a great saver. I don't invest unlike like, do you have a superannuation account? They're like, yes, congratulations. Already an investor. You don't even realize it because yeah, if you have a superannuation account, you're investing your money and you get to direct your super fund to put your money where you want it to be invested, whether that's a high growth, a conservative or a balanced investment option.
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And that, my friend, is an investment decision. So, you know, already you're investing even if you don't realize it. And research shows that women have actually a great mindset for investing. So when one global investment company studied in excess of 8 million investment accounts, what it found is that women not only saved more than men in a given year, they were just shy of one percentage point higher in their savings, but also their investments outperformed men by 0.4% per annum.
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Now, why is this? Well, it might come down to the fact that men trading stocks was a bit like a sport, while women tended to stick to an investment plan and trade less as a result. But in addition to that, what they determined is that women also made more discerning choices around their investments. So what does all this mean?
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Basically, that women are already in the box to be wise and successful investors? Before we get into it, it's really important to note that prior to putting any money into an investment, you need to have all your buffers in place. So, for example, if you have any consumer or high interest debt, you want to pay that off before you start investing.
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It's also essential to have a healthy rainy day or emergency fund. Now you want to ensure that you can set yourself up to invest for the long term and not have to sell an investment because you get an unexpected bill, which is why it's so important to have that rainy day fund in place. That's right. It's important to first establish the financial foundations, and that's what we talked about in earlier episodes.
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So if you haven't done that already, check those episodes out because it gives you some really good basic foundations. But for today's topic, women and investing will be looking at why is especially important for women to invest, to grow and to preserve their wealth. We'll explain and hopefully break some barriers around women investing and we'll quickly touch on some investment types and investment strategies.
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So stay tuned.
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So, Betsy, the first thing we should do is debunk that myth that investing is reserved solely for those with high incomes or for people from a wealthy background. Right. Amen. Yes, Nicole. Investing is accessible to individuals from all income levels and backgrounds. So whether it's micro investing apps or fractional shares in a managed fund or an exchange traded fund, there's an investment option available for every budget.
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So this means that anyone can get started on their investment journey. My first foray into investing was building out my home deposit. I was in my early twenties working in a bank and I was alarmed to realize how much you needed to save for a home deposit. And so I got advice from one of the financial advisors and we worked out that based on my target deposit amount, it was going to take me close to eight years.
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It's a marathon, isn't it? Wow. It has to build up that deposit and rather than me just putting money in a savings account where I earn some interest. He showed me that by investing in a suitably aligned managed funds, one that in my circumstances had a balanced portfolio would mean that I could earn more returns and grow my money faster within that time frame.
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So that's how investing is a great tool and strategy to help you reach your goals further and quicker. Now, just a quick explanation before I confuse people by mentioning shares and bonds and all the different investment classes, when you buy a share, you're buying a portion of the company which you sell on to someone else. When you buy a bond, it's a bit like loaning money to someone for a certain period.
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They promise to pay you interest and you get that interest as well as the value of your bond back as when the term expires. So there are two different types of asset classes that you can invest in shares and bonds. Now, as I said before, if you have a super account, you are already an investor. And if you're willing to wait until you retire to access it, you can put in a little extra into the super account as an investment.
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But that could be a long time for some listeners. And super doesn't always have to be your only investment. You can absolutely supplement it with wealth that you build outside of super. However, the investment strategies that you apply to either investment are broadly the same. All right. So let's maybe break down some investment strategy, shall we? A conservative investment strategy, for example, prioritizes keeping your wealth safe.
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You ideally earn enough money to keep pace with inflation, which I feel like I don't need to define because everyone knows what inflation is these days. So the value of your nest egg isn't eaten away and your investments are low risk. Now, a lot of people close to retire and prefer a conservative investment strategy. Investments tend to be in official state issued bonds, cash and shares in well-known blue chip companies.
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A high growth investment strategy, on the other hand, is all about growing your investment. It concentrates on assets that are likely to increase in value in the long term, such as shares and property. Just be prepared for the value to go up and down in the short term. Somewhere in the middle is a balanced investment strategy and it aims for reasonable returns on your money, but nothing too risky.
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A typical balanced investment mix is about 70% in shares or property and 30% in bonds and cash. A moderate option puts 50% in shares and property, 50% in cash and bonds. It's a bit disturbing to my favor. Buying houses as a way to make money. And that's the way we've seen that a lot. Given the property market in Australia.
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But can you build wealth in lots of ways beyond real estate? Absolutely you can. You can put money in term deposits as an investment. You can invest in shares, bonds, manage funds, including index funds and exchange traded funds and the property market. There's lots of different ways you can grow your wealth. By the way. Index Fund and some ETFs are portfolio of shares and bonds that reflect a certain sector or an index of the market.
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It's the fund manager's job to make sure that the index fund performs the same as the index. It tracks. So investing in a managed fund, including an index fund, is much less work for you as the investor. However, you will pay a management fee for the pleasure and whether you're 50 or 50. The best time to start investing is today.
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It's not about watching the share market every single day either, and investing when prices are just right. Rather, it's about investing consistently over long periods of time. If your investment earns interest an income or a dividend, when you reinvest that interest, it grows or in other words, compounds your original investment. So it's kind of like a snowball rolling downhill and picking up more snow over time and getting bigger.
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And what starts out as small can grow into something quite significant for you. But you can you explain why it is particularly important for women to look at investing? Yeah, well, unfortunately, many women are starting on the back foot when it comes to money. We've mentioned it before. That gender wage gap means that women, on average tend to earn less than men.
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We're also more likely than men to experience career breaks and non earning periods with raising families being one of the leading reasons for a break, according to research by rest. So rest also shows that women who work take an average of 4.2 career breaks. And this can really impact how much we can invest over the lifetime. So we are likely to not build or hold as much wealth as men, yet we live longer.
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And that's why we need to make the money. We do have work as hard as it can and investing can be one of those strategies. So I'm sold on investing. Absolutely. But what's stopping women from investing? There's there's like a number of reasons. I mean, historically, women have often relied on their partner for managing the long term finances, although we are starting to see this shift now, which I'm thrilled about.
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But getting women investing really comes down to confidence and education. So a 2021 survey found that women tend to have less confidence in their investment knowledge, with only 19% of women actually feeling confident enough to select an investment that aligns with their goals. But that doesn't mean women don't want to invest money. It's just that they're more likely to rely on the advice of a financial advisor or be guided by family and friends.
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And according to the ASX, half of the 1.2 million Australians who started investing between 2020 and 2023 were female, which is a big shift and I think a cause for celebration. And it's interesting to know that the top three investments held by female investors are Australian shares, residential property and term deposits. In comparison to male investors who put more money into ETFs, exchange traded funds and Australian and international shares, well, that immediately shows the difference between how men and women invest, doesn't it?
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Yes, it does. You can see the difference in the risk profile and that women tend to go for more conservative investments overall. But remember, at the start of the episode, I mentioned that study which found women outperform men as investors. Yeah, let's keep that in mind. So, listeners, be confident that you'll be an effective investor. The best place to start is to learn the fundamentals of investing.
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You can read books, attend seminars or use reputable online sources. There are free courses for investors that you can do on the ASX website, and it even has a share market game that you can join without paying a cent. Again, another great tip for finding some tools online that help us make smarter decision. Thanks, Fitzy. It's been great to debunk the myths about women and investing.
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When we come back, we'll be looking at how to set up your investment strategy. So stay tuned.
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Welcome back. We've covered of how women can be great investors a bit. See, how do we get started? Okay, so I often tell people that to get started with investing, there are five essential steps. One set clear financial goals to educate yourself. Now you could meet with a financial advisor for assistance or ask your super fund to connect you with a financial advisor.
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And then number three, define your risk tolerance. Number four, I would say, is start to build a diversified portfolio and then five. Start small and be consistent. Alright, so let's go into some detail here. So can you expand on those five points in a bit more detail? Yeah, absolutely. So first of all, you're going to set some clear financial goals, so identify your financial goal and objective set out.
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What is it that you're actually trying to achieve through investing? It might be saving for retirement or funding education or like my example, buying a house. Contrary to popular belief, investing isn't the goal in and of itself. It's the means to the end, the end being what you want out of life. So the best and most important place for you to start is to actually articulate your goals.
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And once you know what you're trying to achieve, that includes how much money and buy when you need it. Then deciding your investment strategy is easy. It's literally paint by numbers, and setting clear goals will help you stay focused as well. The second thing I talked about was actually getting educated, which I've mentioned previously, but key terms to get familiar with include compound returns, asset risk, return volatility, liquidity, asset allocation, risk tolerance and diversification.
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Now they sound like a lot all in one sentence, but honestly, if you can systematically work your way through and understand these terms, you're going to make a much better investor. The third step I mentioned is defining your risk tolerance. And what does that actually mean? Well, basically you're going to assess how comfortable you are with taking on the investment risk and how you're going to balance that with what you're trying to achieve in the timeframe which you're going to achieve it.
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So consider your financial situation, how long you want to invest for, and your personal preferences, such as ethical investing. Now, typically, the higher your potential return, the higher the risk. And that means if you want to invest with lower risk, you'll earn a lower return. What this also typically means is the higher your risk, the longer your investment timeframe should be.
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So then you're pretty much ready to get started and you want to get started with a diversified portfolio. What does this mean? This means spreading your investments across different types of assets or different types of sectors. By the way, low cost index funds or exchange traded funds can be a really convenient way for you to achieve instant diversification.
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And then number five, my final one is all about starting small and being consistent. So you don't need tens of thousands of dollars to get started with investing. Just start by investing with a small amount that you're comfortable with and doing so on a consistent basis. So you might regularly contribute to an index fund or you might buy more assets when prices are low and fewer assets when prices are higher, averaging out your costs over time.
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Okay, So there the five steps. Now, if you're hatching into this episode, hoping that I would give you the hot stock tip or recommend specifically what you should be investing in. I'm sorry to disappoint you, but I will not be doing that one because basically personal finance is just that it's personal. And what is going to be the right investment and the right strategy for you will depend on your personal financial situation, your goals, your risk tolerance.
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And so it's really important that you work out what is the right investment for you. And if you're not sure, that's a really good sign that you should get some independent financial advice to guide you. So see those five essential tips were really helpful. But I want to circle back to one term that you referenced earlier, and that's risk tolerance and investing.
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Could you explain a bit more about that? Yeah, there's so much jargon in the investment world, isn't there? So let's break it down. Risk tolerance refers to your willingness to possibly lose money on an investment and your ability to absorb that loss. Sometimes we call it the sleep test. You know, What's your sleep test? When it comes to investing?
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At what point do you start losing sleep? So, for example, losing $200 from a $500 investment probably hurts a lot more than losing, say, $200 from a $10,000 investment. And you may want to minimize risk while maximizing returns. So how do you do that? Well, one way that you can do it is diversifying your investments. So spreading your money across lots of different investments so that a or assets or sectors so that a downturn in one area is balanced by growth in another.
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Another strategy to minimize your risk and maximize your returns is to hold your investments for longer. Ideally, five years or more because shares go up and down on the day to day. But over the long term, that volatility, the price fluctuations, they should balance out. You might also have a different tolerance for risk at different stages of your life, and it's really important to be mindful of this.
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This is often called life cycle investing. So when you're younger, you might be willing to look at riskier investments with potentially higher returns because you've got plenty of time to keep that money invested and recover from any losses. But say you're closer to retirement Will. In that case, you might want to protect your nest egg. So less risky investment options can be more appealing.
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Lifecycle investments automatically decrease in risk over time as you get closer to your target retirement age. In saying all of that, a reminder of that, this podcast is for education and entertainment, obviously purposes only. So it's not a financial advice and it doesn't take into account your objective financial situation or needs. So you should consider if the information in this podcast is appropriate for you and contact a professional financial advisor.
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If you're seeking financial advice.
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And I suppose that brings us pretty neatly to the dangers of those get rich quick investment schemes. So there seems to be a growing number of scammers out there. I don't know how many texts I get on a regular basis. My packages are locked everywhere around Australia at the moment. So tell me there's a scam every day around investing.
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What do we need to know? Yeah, and I'm smiling, which we got to say on the podcast. But just because I see it happen to people all the time, every day, and it's it's that allure, you know, our brain is wired for instant gratification. The allure of a get rich quick scheme sounds great. We don't want to have to work too hard or wait too long so we get lured in.
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And look, if you spot one of those really amazing thing and I'm doing quotation marks for the listeners, amazing investment opportunities on social media or worse, if someone sends you a text message or you get a phone call out of the blue, especially if they're like really, really persistent, please do not take the bait. Believe me, if an investment seems too good to be true when there's big returns with absolutely no risk, it's because the investment is likely a scam.
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That's the honest truth. So there's lots of helpful information out there on how to spot an investment scam. If you check out Money Smart today, you or if you check out scamwatch. That's another website available and it's scamwatch dot gov. And today you. And they'll tell you what the latest scams and also how to avoid being lured into one of these investments.
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So always check before you invest. It's also a good idea to check out the Asik website and confirm that someone actually who says they're an adviser has a financial services license before doing business with them. And this can also mean checking out ASIC's offer notice board to see if an investment prospectus is actually registered. Well, that's a really good tip.
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So, Betty, we're nearly out of time for this episode. Can you believe it? And the entire series. it's been a long one. So do you have one last piece of advice you'd like to share? I'd say I would say that you don't need to be rich to start investing. You only need a small amount to start. But you do need to be consistent.
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And the more you learn, the more confident you will be. Well, it's been an absolute pleasure hosting these Women's Financial Empowerment podcast with Betsy Westcott. I'm sure we've all learned something useful. I know I definitely have. So remember, you can visit previous episodes in the series at any time. We certainly have covered a lot of ground from everyday money management to women and super family finances and money in relationships.
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It's been fantastic Sharing Betsy's insights. I hope you have enjoyed it as much as I have. I'm Nicole Banks. Stay well and financially healthy.
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