Meet Wellness Collective, our immersive curriculum with Athleta that hooks you up with actionable advice from the smartest experts and brand founders in wellness right now. Get the goods at our monthly event series in New York City plus our online one-month wellness plans. Here, Sallie Krawcheck, CEO and co-founder of Ellevest, shares her insight on how to go deeper with your investing know-how.
Real talk: Unless you have a degree in finance, listening to someone rattle off investment terms can sound like a foreign language. And a lot of you agree—when we asked you to share your most pressing investing questions, the response was overwhelmingly “can someone please translate for a beginner?”
To break it down for you, we asked Sallie Krawcheck, CEO and co-founder of Ellevest, to explain why women still feel a barrier to investing—and how to combat that.
“Ellevest’s mission is, to put it simply, to get more money in the hands of more women,” explains Krawcheck. “The entire investing industry was built by men, for men. In fact, 86 percent of financial advisors are men. Is it any surprise that all this wasn’t working for women?”
Nope. That’s why Krawcheck built a platform “that takes our real lives into account—things like the fact that women get paid less, on average. And that they take more career breaks in order to care for children or other family members. And on average, women tend to invest less of their money than men do.”
Not down with those stats? Neither are we. Below, Krawcheck drops her financial wisdom so you can amp up your investing strategy in a way that actually makes sense for your goals—and tap into the stress-free vibes that come with taking control of your own financial wellness.
Keep reading for her investing guide to some of the terms you need to know if you want to start growing your money.
First up is stocks, which are a way to purchase a small piece of a large company. As the value of that company increases, so will the value of your stock. However, since the status of a company can be volatile over time, your stock’s price can fluctuate frequently—making it a riskier form of investment.
“[Stocks] tend to have more investing risk than bonds or other common types of investments, but they also have the potential to earn more in returns,” Krawcheck explains. “So the more time you have until you’ll need your money, the more of your portfolio can typically be invested in stocks.”
Krawcheck doesn’t recommend trying to “beat the market” or earn a quick return by buying and selling shares of stock from individual companies, but you can (“and almost always should,” she says) include stock in your investment portfolio by investing in ETFs or mutual funds. Which brings us to…
These are a collection of many individual investments and often include stocks. When you invest in a mutual fund, you’re buying shares of that specific fund instead of directly buying the actual investments inside it, Krawcheck explains.
“When it comes to investing, you’ll hear people say that your portfolio should be diversified,” she says. “This means you shouldn’t put all your eggs in one basket. The more diversified your investment portfolio is, the less risky it may be. So funds are useful because they’re naturally diversified; they include many different investments at once.”
Mutual funds are useful for people who want to invest in a certain industry or social cause that doesn’t have associated ETF options yet. For example, if you put your money in an Ellevest Impact Portfolio, you’re earning your financial returns from companies that advance women (and investing in female empowerment, literally).
Next up are ETFs, or exchange-traded funds, which are similar to mutual finds with a few differences. “First, you can trade ETFs throughout the day, like you can with stocks, whereas with mutual funds, you can only trade them once a day,” Krawcheck says. “ETFs also tend to be less expensive to own than mutual funds.”
Krawcheck recommends ETFs as a good starting point for beginner investors (most of the investment portfolios at Ellevest utilize ETFs) because they’re both low cost and low risk.
“ETFs can be a good fit for anyone who’s ready to invest (meaning you’ve paid off high-interest debt and built an emergency fund), whether you’re just getting started or you’ve been investing for a long time,” she says. “The combination of low costs and built-in diversification can make them really useful.”
Which to choose?
Krawcheck boils much of her investing advice down to one question: How long do you have until you’re going to need the money? If you need it soon (for example if you want to put a down payment on a house in five years), you’ll want to go with a less risky option than if you’re saving for retirement.
She explains the risk levels of each option like this: “For anyone, ETFs are often best. They’re low-cost, accessible, and bring built-in diversification to your investment portfolio. Mutual funds can be useful if you are looking to invest in a specific industry, vertical, or social cause. And for individual stocks, I only recommend trading them if you’re using money that you wouldn’t be afraid to lose—it’s just risky.”
But you don’t have to go it alone. If your situation is complex, opting for an in-person financial advisor is a good call. “But for most people, a digital advisor can really help by using smart, data-driven algorithms to take this work off your plate at a relatively low cost,” says Krawcheck. Just count it as an investment toward your long-term wellness goals.
In partnership with Athleta
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