How To Become a Successful Female Investor

Research has shown that women are savvier investors than men. On average, women who invest get higher returns and save more than men who invest.

So, why are so few women investing in businesses?

In my experience as an entrepreneur and investor, there are two main things keeping women from investing: confidence and education.

My goal is to bridge the gap between women and investments by empowering women to become successful investors. Even more importantly, I want to empower women investors to make smart decisions and invest in women-owned businesses, which historically receive significantly less funding than businesses that are owned by men.

Why Now is the Time to Start Investing as a Woman

Right now, there is a huge opportunity for women to support women-owned businesses. In 2019 women owned 42% of companies but only received 2.8% of the venture capital being raised. That’s outrageous! Even more surprising is the fact that 2019 marked an all-time high number of women businesses that got venture capitalist financing.

Women-owned businesses are poised to grow at even faster rates over the next few years. Without getting support from investors, their business owners will need to find alternatives for financing, often at a high interest rate, or close down altogether.

The number of women-owned side businesses is growing twice as fast as the rate of fulltime women-owned businesses. As women are able to secure financing for their side businesses, they can turn them into fulltime businesses, taking their financial security into their own hands and building an asset they can sell later.

If we could double the amount of women-owned businesses that receive funding, we could touch thousands of lives. Think about it. What amazing things could happen if more women received the funding they need to grow and scale their businesses? There would be more jobs, more advancements, and more opportunities for industries to grow around the world.

There is a huge gap between how many women-owned businesses are seeking funding and how many investors are out there ready to give it to them. Through Women in Business Podcast, I’m seeking to actively close this gap by connecting women business owners with women investors.

In addition to supporting each other as women, I believe that women investors will enjoy better returns when they invest in women-owned businesses. A recent report from the Boston Consulting Group determined that women-owned businesses, on average, generate more than twice as much revenue per dollar than male-owned businesses.

Ready to get started? Here’s what you need to know.

How to Start Investing as a Woman

There are three main things you need to know before you can start investing as a woman:

  1. It’s better to start now than later
  2. You need to know how to read and understand a company’s financial statements
  3. You’re going to make mistakes, but you’ll learn and get better as you go

There’s No Perfect Time to Start Investing

I want to start with what I think is the biggest myth of investing, which is that you need to hit a particular milestone or income level to be an investor. While it’s true that a lot of angel investors and venture capitalists are able to spend hundreds of thousands, or even millions, of dollars, investing in private companies, you can still get in on a good investment with less cash.

If you want to start investing in private companies, you’ll, of course, need some money. If you have been making an income of $200,000 for the last three years, then you can invest as an accredited angel investor. If you haven’t, then you can still invest in private businesses as a non-accredited investor through alternative means, such as crowdfunding or peer-to-peer lending.

Know a Good Investment Opportunity When You See One

The second thing you need to know is how to read a company’s financials. Understanding the women behind the brand as well as the vision for where the company is headed are key to deciding whether or not a company is worth your investment. Even more importantly, you need to know if the company has a high chance of making money.

When reading a company’s financials, you want to look for a few things in particular:

  • A trend of positive net income
  • Positive and growing operating cash flow
  • Proof that revenue and earnings have grown over time

No matter how long a company has been in business, you want to see a proven record of success before making an investment. If you are looking to invest in a brand new company, spend some time getting to know the founder and do some research to see what her track record has been with other companies.

To get started figuring this out, look for companies in three or four industries that you understand. Some examples include:

  • Tech
  • Retail
  • Real Estate
  • Health Care
  • Manufacturing

The list goes on and on. Basically, if you are already familiar with how an industry works, you’ll be more likely to have a working understanding of what it will take for a company to be successful.

Figure Out How to Move on After Failure

One reason women are so much better at investing than men is that we’re generally more cautious and risk-adverse. We are less likely to jump into an investment opportunity without taking the time to research the company and decide if it truly is a good investment opportunity.

But that doesn’t mean that women never fail at investing.

I’ll be honest with you. You’re going to fail sometimes. Not all the time, not even most of the time (hopefully). But there’s always some risk associated with investing. Companies fail. Founders bail out. Global pandemics and natural disasters force businesses to shut down unexpectedly. You get the picture.

This is why it’s important to take your time getting to know a company before you invest. Perform a risk assessment to determine how likely you are to actually see a return on your investment. Then, be patient. You aren’t going to see a return overnight. It might take years for an investment to ever pay off. So, it’s important to invest using money that you don’t need for your day-to-day life.

One way to reduce your risk of failure is to invest in more than one company at a time. By investing in multiple companies, you spread the risk around so that you are more likely to have successes than failures. And when you do encounter failure, remember to take a breath and move forward. The risk is worth the reward.

Final Thoughts

I started Women in Business Podcast to educate women about how to get started investing because I believe there is so much opportunity right now for women to invest in women-owned businesses and see positive returns. I know that by working together to bring each other up, we can get businesses funded and make amazing things happen.

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