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Investing in a retirement account is a great way to build long-term wealth, but ideally, you’ll have a diverse array of investments that can help your money grow. Fortunately, many savvy women are proactively investing in assets outside of a workplace retirement account or IRA.
Fidelity Investments’ 2024 Women & Investing study found that women who invest outside of retirement accounts are investing an average of 9.5% of their paychecks in other assets. It also revealed the most common assets these women are investing in. In this “Financially Savvy Female” column, we’re exploring the top assets women are investing in outside of retirement accounts, plus the pros and cons of each.
Individual Stocks or Bonds
Among women who invest outside of a retirement account, 79% invest in individual stocks or bonds.
“Investing in individual stocks or bonds means choosing and purchasing them individually, which can require more research and oversight, but also gives greater control and transparency in terms of what you’re purchasing and when you’re purchasing or selling,” said Kelly Lannan, SVP of emerging customers at Fidelity.
“Investing in stocks and bonds can yield a higher rate of return than keeping money in cash due to compound interest, helping you potentially earn more money and achieve your goals quicker.”
One downside of investing in individual stocks is that they may come at a high price that’s not always affordable for the everyday investor. Fortunately, Lannan offered an alternative that could lower the barrier to entry.
“Investors could also consider fractional shares — also known as dollar-based investing — which lets you purchase stocks or ETFs based on a dollar amount, so you’re able to purchase a fraction of the share,” she said. “This is a great option for investors who want to get started with smaller amounts of money.”
Money Markets and Certificates of Deposit
The Fidelity study found that among women who invest outside of a retirement account, 63% invest in money markets or CDs.
“Both money market funds and CDs are considered relatively safe investments,” Lannan said. “A money market fund might be better for an investor who wants to prioritize liquidity and flexibility over rate of return, whereas a CD might be more attractive for an investor who wants a greater rate of return and is willing to wait for a specific time period.”
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Stock and Bond Mutual Funds and Exchange-Traded Funds
Among women who invest outside of a retirement account, 70% invest in stock mutual funds or ETFs, and 52% invest in bond mutual funds or ETFs.
“Investing in a stock or bond mutual fund or ETF can help investors achieve more diversification with a lower dollar commitment than purchasing individual stocks or bonds,” Lannan said. “This can be a great option for investors who want to get invested, but don’t have as much time to dedicate to researching and monitoring individual stocks.”
On the other hand, mutual funds and ETFs don’t always offer as high returns as individual stocks and bonds.
“Ultimately, it comes down to an individual investor’s preference,” Lannan said. “Purchasing individual stocks and bonds can give greater control, but it also requires more responsibility to manage that portfolio. Investing in a fund can help provide more diversification, but less control on what you purchase and sell.”
Real Estate
Real estate is also a popular investment for women who invest outside of retirement accounts, with 52% of these women investing in real estate assets. This can include buying a home, investing with REITs or becoming a landlord.
“Purchasing a property and renting it out to tenants — i.e. becoming a landlord — is typically the first thing that comes to mind when people think of investing in real estate,” Lannan said. “Some potential benefits include building equity, hedging against potential inflation and potential tax advantages, as you may be able to deduct mortgage interest on your taxes.”
Even if you don’t rent out the property you own, this can still be a wise long-term investment.
“Owning your own home is another way to become a real estate investor,” Lannan noted. “Like landlords, homeowners often build equity in the home over time as they pay off their mortgage, helping them accumulate wealth and own assets.”
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