Historically underserved by the financial industry, women are increasingly investing in the stock market today. Thanks to advances in technology and a few other factors, the gender imbalance within the investment community is beginning to right itself.
More than that, though — women are found to get better investing returns than men. A Fidelity study from 2021 showed outperformance by 0.4% over a decade from a pool of five million of its customers.
Here, I’m going to discuss three top stock market strategies that might well be used more than by their male counterparts, and could potentially help even more female investors achieve their financial goals. Whether the aim is to generate income today or build wealth for the future, these approaches could be worth considering.
Income investing
This involves investing in companies that pay out dividends (cash payments that are made out of company profits) to their shareholders on a regular basis.
This style of investing has several advantages.
For a start, one has two potential sources of return – capital gains and dividend income.
Secondly, one can generate passive income from their investments.
Third, companies that pay dividends tend to be well-established businesses. As a result, their share prices are often less volatile than those of smaller growth companies.
Overall, the strategy is well suited to those with lower risk tolerances and/or those looking for additional income.
One example of a dividend stock is consumer goods company Unilever. It has a great track record when it comes to rewarding investors with cash payouts and currently offers a yield of nearly 4%.
Growth investing
This involves investing in companies that are growing their revenues and/or earnings at a fast rate.
Growth investing can be a little riskier than income investing. That’s because the share prices of growth companies can be quite volatile at times.
However, the upshot is that the rewards can be greater.
Just look at the share price of chip designer Nvidia, which is spearheading the artificial intelligence (AI) revolution today. Over the last five years, it’s up over 600%.
Now, growth investing isn’t for everyone. However, it can be a good strategy for those with longer investment horizons as these investors can afford to take on more risk in the pursuit of strong long-term returns.
Quality investing
This approach, which is pursued by stock market legend Warren Buffett, involves investing in high-quality businesses that have great track records when it comes to generating shareholder wealth.
The definition of a ‘high-quality’ business can be subjective. However, generally speaking, quality investors look for companies that:
- Have steady, growing revenues and earnings
- Are highly profitable
- Have solid balance sheets
One example of a UK company that’s considered to be high quality is accounting software specialist Sage. It’s a very profitable business, and it has been a great wealth generator over the long run.
Finding the right strategy
It’s worth noting that these approaches to investing are not mutually exclusive. For example, one can combine income, growth, and quality strategies to build a fully-diversified portfolio.
By doing research – with the help of services like The Motley Fool – an investor can put together a portfolio of shares that’s in line with their own personal goals and risk tolerance and will give them a good chance of success in the stock market.
