Though men and women are both subject to getting trapped in the web of inappropriate investments, single women, divorcees, and widows have different concerns from their mbusiness womanCredit: Image: Ambro / FreeDigitalPhotos.netale counterparts. Statistically, women’s pensions are only a fraction of men’s payments.  This means that once a woman reaches retirement and is dependent upon pensions for her living expenses, she may be in for trouble if she doesn’t have sufficient savings.

Since women often get less income, they are more susceptible to the temptations of risking too much of their principal in order to try to get above-market returns. Whereas it is reasonable for people to have some amount of risk in their portfolios, risk should only be undertaken in the context of a financial plan with a clear asset-allocation model. 

Whenever an investor considers an investment, the level of risk needs to be taken into account.  If “hot” ideas with great returns were really as wonderful as they sounded, you can be sure the large mutual fund companies would buy into them.  And, if you’re ever told an investment is guaranteed, be wary.  It’s impossible to guarantee investment programs that can return unbelievable numbers.

On the opposite side of the spectrum, there are women who are too afraid to risk anything and prefer to invest in extremely conservative investments or just place their funds in a bank account.  This approach to investing is problematic in so far as their money may not receive high enough interest payments to keep pace with inflation.  This means that even though their bank balance may be the same over the years, the real value of their dollars diminishes.  So even though they may have the same balance (or slightly more if interest payments were paid), their money has actually lost purchasing power.

Remembering the golden mean, the lucky middle between two extremes, can help you make sure your golden years are the way you want them to be.  Women of all ages should educate themselves about their investment choices so they can differentiate between the reasonable risks and the improbable scams.

For more great tips on financial planning for women, read, Why Women Need to Plan

Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.