8 Investment Myths That Cost Women Millions

Photographed by Raven Ishak.
You work hard, right? You’re raising your hand for the promotion, asking for the raise, networking like crazy, and maybe even have a side hustle to bring in some additional cash. You know ambition.

But here's where things get tough for young women, specifically: While women know what it takes to be seen and have their voices heard alongside male colleagues, they still have a huge blind spot when it comes to investing. This can cause us to fall way behind men in terms of financial wealth and power, to the tune of tens of thousands, and, in some cases, even millions of dollars over the course of a lifetime.

And the gender-investing gap has huge real-world repercussions. Having less money than men can keep us in relationships we may not want to stay in, can make us play it safer at work, and can cause us to miss out on opportunities (like starting a business or buying a house).

Do I have your attention?

The good news is that the gender investing gap is fixable. And it all starts with figuring out our own investing fears and misperceptions. Click through for the eight biggest myths that are literally costing you big bucks.
The projections of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Information was obtained from third party sources, which we believe to be reliable but not guaranteed for accuracy or completeness. The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person. Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.
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Illustrated by Chloe Seroussi.
Gee, I wonder why so many women think that. Is it because the industry has never met a war or sports analogy it didn’t love? Beat the market, pick the winners, generate alpha. Is it because the investment advisors chosen to speak at conferences often resemble a photo from your dad's 40th anniversary frat house reunion? Is it because one could easily confuse TV shows on the markets and investing with The NFL Today? Or is it because the symbol for the industry is a bull? (And the statue of the iconic bull near Wall Street is an anatomically correct bull, at that. Very anatomically correct.)

And if the message from the industry is that it’s for guys, it’s also that it’s for rich guys. So many of the commercials for the industry have been characterized by hushed voices, with conversations centered around “trust” and “legacies” and “investing for second beach houses."

But now, digital investment platforms are disrupting the industry — and that's a good thing. Online providers are always open, new entrants are dropping account minimum sizes, and the old white dudes behind fake mahogany desks are being replaced by investing algorithms that, in my opinion, can build more customized investment portfolios than any human ever could.

My firm, Ellevest, does all of this, as well as taking into account woman-specific factors, such as that our salaries peak sooner in our careers and that we live longer. That salary-peaking-sooner thing is frustrating, certainly, but important to take into account. Other start-ups are based on investing your spare change or will sweep into investments any amount in your bank account above a certain level. So investing is moving from “not for us” to “built expressly for us” pretty quickly.
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Illustrated by Chloe Seroussi.
If you have credit card debt, this is absolutely true. Skip investing (for now), and forgo all kinds of fun and any unnecessary additional expenses to pay it off.

That’s because the interest rate on credit card debt can be 15%, 20%, or even 30%. Those rates are well in excess of what we at Ellevest forecast to be the typical returns on a diversified investment portfolio of stocks and bonds, which hovers around 6%. So we never recommend investing if you have credit card debt outstanding, because, in our estimation, you will end up paying what you may earn by investing — and more — to the credit card companies.

That said, not all debt is created equal. If you have low-interest-rate debt, such as some types of student loan debts, or a mortgage, it can pay to invest while simultaneously paying off that debt. Think about it: If your debt costs 3% a year, and our forecasts are correct, and you may be able to earn a higher return by investing in an equity-based portfolio, you come out ahead.

This is even more true if you have an employer-sponsored 401(k) match. A match means that if you put money into your 401(k), your employer will as well. Each program can vary, so check with your HR department on how yours operates…but the bottom line on this is: An employer-matched 401(k) is literally free money. Free money! How often do you hear “free” and “money” in the same sentence? Not sure if your employer offers this perk? Run, don’t walk, over to your HR department and find out.
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Illustrated by Chloe Seroussi.
Once you subtract your rent, your going-out budget, your takeout habit, and your streaming account services from your salary, the amount left over to invest is pretty close to zero. It's psychological, and something we're all guilty of: The combination of our "needs" and "wants" often doesn't leave a ton of cash left over for the things we know we "should" do. That's why it's best to be proactive about figuring out where your investment money will come from right off the bat.

Have you heard the term “pay yourself first”? This means that you save or invest a set amount of money from each paycheck and then calculate how much rent you can afford, how big your clothing allowance is, and so on. Depending on what your big goals are in life, the amount you set aside to invest can be between 10% and 20% of your take-home pay.

Sound sort of depressing? Well, it depends on how much you want to buy a home of your own, or start your own business, or retire like the cool grandma you know you’ll be. And also how important being in financial control and building a financial cushion is to you. (For what it’s worth, my answer is “very important.”)
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Illustrated by Chloe Seroussi.
I hear this all the time: "I want to invest, but I don’t want to risk losing everything." I get it. And this can certainly happen to individual stocks or bonds.

But did you know it didn't happen in the 2007/2008 downturn? It didn't happen when the internet bubble burst in 2000. It didn't happen in the Crash of 1987. And it didn't happen during The Great Depression. That's not to say that some people didn't lose a lot of money. But if you have a diversified portfolio, it's unlikely that you literally would lose everything you have. For that to happen, the external events would have to be violent, dramatic, fallout-shelter sort of stuff.

Yes, investing is uncertain. But the one thing that is certain? The fact that a dollar in the bank today will be worth less than a dollar in the bank tomorrow.
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Illustrated by Chloe Seroussi.
Here’s one of the reasons that we tend to think of investing as riskier than it actually may be: We imagine investing as a one-time thing. I invest, and then the market either does well, or it doesn’t. I win or I lose. But that’s not the successful way to invest. Instead, the best strategy is to invest over time, a bit every month or a bit from every paycheck. And that way, the “decision to invest” isn’t as daunting.

So you invest some money today and the market goes down. Okay. But then, you invest the same a week from now, when the market is lower. And then, in a few weeks, the market bounces back up, causing those shares to rise. Sometimes you buy high, sometimes you buy low, no big deal, because over time, you average out to buying at an average price. Which means you can end up earning at, more or less, average returns.

Average? Is that good? you may be asking. Yes, it is if those averages continue to be, over time, several percentage points above what you would earn over bank account interest rates.

But shouldn’t I want to do better than average? Shouldn’t I try to figure out when the markets are high and avoid them and just buy them when they’re cheap?

No. No. One more time: No. I hear how this makes sense in theory, but there is no evidence that even full-time professionals can do this in practice. None. And perhaps the greatest investor of our time, Warren Buffett, dismisses “market timing” as one of the top investing mistakes you can make. No one really knows when the stock market is high or low until it’s in our rear-view mirror. Not even the professionals.
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Illustrated by Chloe Seroussi.
I hear this one all of the time: I really do plan to invest...later, when I have more money. This sounds right, but it doesn't work that way. That's because this logic fails to recognize the importance of an investing concept called “compounding.” This idea is so important that Albert Einstein is reported to have said, “Compound interest is the eighth wonder of the world.”

So what does “compounding” mean in investing? It means that you earn a return on the money you invest, and you earn a return on the returns you’ve already earned.

Here's how it works: Invest $100, earn 10%, and you’ve got $110. Earn another 10%, and you don’t earn it just on the original $100, but on today’s $110. So now you’ve got $121. Earn another 10% and, again, it’s not on the original $100 but on today’s $121, so now you’re up to $133. Get it? This builds as it grows.

Pretty important stuff, then, to invest early. How important?

Say you’re making $85,000 a year and saving 20% of it in the bank. You think you’ll earn more later, so you wait to invest. You wait 10 years, so you’ve really got some money to put to work. On average, how much did that waiting cost you, according to our Ellevest analysis?

$100 a day.

Ok, wow! So please get started investing early.
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Illustrated by Chloe Seroussi.
First off, there are the ins and outs of mutual funds vs. ETF, and what a 12b1 fee is, and of course you have to know the definition for a managed account, and what a managed account is. "In fact, I need to take a couple of weeks off to get this all figured out." (That last sentence is an actual quote from an actual woman who works in Silicon Valley!)

Stop. Breathe. And don't worry so much. Look, it’s hard for me to argue against more financial education or learning more about investing. (Note to my kids’ high schools: Ever think about replacing that woodworking class with, you know, something they can actually use, like financial education?)

So yes, learn everything you can. But don't wait to "know everything." Because for every day or year you wait, it's literally costing you.

We will never “know everything” about investing. Honestly, neither do the professionals. But the best way to learn, fast? Dive in.
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Illustrated by Chloe Seroussi.
Just do it. Just invest.

Here’s my take on it: Find a firm that’s a fiduciary (which means it’s obligated to put your interests before its own), run by experienced professionals, which charges fees lower than 1%. Then get yourself invested in a low-cost, diversified investment portfolio. Invest in it on a regular basis, and don’t look at it too much. (If you look, you’re likely to, you know, do something, which can often be the wrong thing at the wrong time.)

For more, here’s my take on the five things you need to know about investing and how to choose a digital investment advisor. Here’s Refinery29’s take on what you need to know before you invest.

The bottom line: There are no PhDs in advanced math or regulatory science required for you to invest! It’s not as hard as the industry makes us — or perhaps wants us — to think. It’s not just for the solemn, stern-faced people sitting at a mahogany desk with a leather portfolio you see in investment commercials; it’s for us, too. And making it a habit wins the day.

Sallie Krawcheck’s professional mission is to help women achieve their financial goals. She is the CEO and cofounder of Ellevest, a digital investment platform for women, and she is the chair of Ellevate Network, a global professional women’s network. Sallie ran Smith Barney and Merrill Lynch. She’s been called “The Last Honest Analyst” by Fortune Magazine and was named one of Fast Company’s Most Creative People in Business.
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