Women Wealth & Wisdom

Learn the Basics of Investing

When it comes to money and investing, women have unique financial needs. Women earn less money¹ and live longer than men, so their money needs to go further and last longer. Women are also more likely to be single through widowhood, divorce or choosing never to get married². They are, therefore, more likely to be solely responsible for their own financial independence at some point in their lives. To take control of their finances, women should consider developing a strategy, whether they are single or married, younger or older.

Investing can be a key component of any financial strategy. However, with the unpredictability of certain investment vehicles and the multitude of investment options available, it’s easy to get overwhelmed when considering how to invest, especially for women. According to a survey performed by the Financial Literacy Foundation in 2007, when it comes to finances, many women are less educated and less confident than their male counterparts.

The first step in overcoming the intimidation of investing is to change how you think about it. Investing is simply putting the money you have to work after you choose a suitable product and decide on the level of risk you are willing to accept.

When choosing how to invest, consider your investment objectives, time horizon, tolerance for risk, personal investment experience and overall financial situation. Once you do this, you will be in a better position to determine the types of investments best suited for your specific goals and objectives.

Determining Your Risk Tolerance

There are three general risk tolerance categories: conservative, moderate or aggressive.

The conservative investor generally has a very low risk tolerance and seeks to protect principal investments from market risk by placing money in lower risk investments. A major risk factor to the conservative investor for reaching long-term goals is inflation, which could eat away at savings’ purchasing power. Even an low inflation rate of 2.5 percent cuts the power of your savings in half over a 25-year retirement³. To help maintain your spending power and standard of living, your investment returns needs to keep pace with the annual inflation rate. Women tend to be more conservative investors than men⁴, so it is particularly important for women to evaluate the risks as well as the benefits of a conservative investing style.

The Moderate Investor:

The moderate investors tolerance for risk is higher. They are willing to sacrifice lower risk investments to potentially achieve a more attractive long-term return. The moderate investor generally uses a diversified mix of fixed income and equity investments to potentially achieve these higher returns, and takes on more investment risk than the conservative investor.

The Aggressive Investor:

The aggressive investor assumes an increased amount of risk for the potential of greater investment returns by primarily investing in equities. This aggressive approach is best suited to individuals with an investment time horizon of 10 years or longer, who have the potential, over time, to mitigate the losses of short-term market fluctuations and benefit from the equity markets’ long-term historical growth. It is most important for the aggressive investor to keep a long-term view of the markets and not to react prematurely to short-term market trends and downward market fluctuations.

Types of Investments

Here are some of the most commonly used investment vehicles you may consider as you develop your investment strategy.

Stock represents ownership of a company. Corporations can issue different types of stock, but the most typical is common stock. If a company is publicly held, its stock can be purchased through stockbrokers, online brokerage firms, individual investors or institutions.

The success of a stock investment is contingent on the company’s performance. If the company does well, the value of the stock generally increases. Conversely, if the company does poorly, or if something happens to disrupt its activity, the stock’s value may decrease. If a company is forced to liquidate, it is first obligated to pay its creditors, bondholders and those who hold preferred stock (a limited issue stock that does not hold voting rights), before those who own common stock. Stocks are susceptible to market fluctuations.

As a shareholder of common stock, you have voting rights on the election of a board of directors and other important issues affecting the direction of the company. Many companies also distribute a portion of their yearly earnings to stockholders in the form of dividends.

Mutual Funds pool the money of its investors and spread it over a number of investments. All mutual funds are controlled by fund managers and have certain, pre-established objectives that determine what types of securities it invests in. Most mutual funds are part of a family of funds, each with their own objectives and portfolio of securities. Before deciding on any one mutual fund, you should first research the objectives of the fund and decide which most closely match your own.

Mutual funds provide more diversity than individuals stocks. However, investing in mutual funds involves risks and it is important to remember that values increase and decrease along with the component securities, and so they are not immune to market downturns and reduced values.

Investment-grade bonds generally carry less risk than stocks and mutual funds. Through the purchase of bonds, you are essentially loaning either the government or company money. In return, the entity that issues the bond agrees to repay the face value of the loan with interest at a specified time in the future, the date of maturity. Bond investments are subject to interest rates risk so that when interest rates rise, the prices of bonds can decrease and the investor can lose principal value.

Annuities are insurance products that can help provide income during retirement. You purchase an annuity by investing a sum of money, either all at once or over a period of time. In return, the insurance company agrees to provide you with a steady income beginning at an established date in the future and usually until the time of your death.

For more information about annuities, please visit AXA Equitable’s Learning Center.

Certificates of Deposit or CDs are a low-risk way to make sure you have access to money in the future. A CD is purchased for a specific amount of money and is subject to a fixed rate of interest for an established period of time. When the specified time is up, you receive the face value of the CD, what you initially paid, along with any accrued interest.

CDs are usually FDIC insured up to $100,000, assuming the financial institution you purchased it from is also insured. This means that your money is most likely protected. The drawback, however, is that there are usually penalties for cashing-in a CD before the specified time and, since it is a very conservative investment, your rate of return will be lower.

All investing carries some measure of risk. But by knowing your investment style, tolerance for risk and the types of investments available, you will be in a better position to reap the rewards. Before making any decisions, enlist the counsel of a financial professional who can give you a complete picture of the different investment vehicles available, and which may be best for you.

For more information about investing, visit AXA Equitable’s Learning Center.

Useful Resources & Links:

1) U.S. Bureau of Labor, Highlights of Women’s Earnings in 2008, 2009
2) U.S. Census Bureau, “Current Population Survey, 2008 Annual Social and Economic Supplement,” January 2009.
3) U.S. Department of Labor; Bureau of Statistics, Washington, DC 20122; Consumer Price Index, 2009.
4) Hewitt Associates, July 2009 research study

Please consider the charges, risks, expenses and investment objectives carefully before purchasing a mutual fund. For a prospectus containing this and other information, please contact a financial professional. Read it carefully before you invest or send money.

The investment return and principal value of a mutual fund will fluctuate with changes in market conditions and may lose value.

Diversification does not guarantee a profit or protect against loss in a declining market.

AXA Equitable Life Insurance Company (AXA Equitable) (NY, NY)

Securities are offered through AXA Advisors, LLC, member FINRA, and SIPC. AXA Advisors, AXA Network and AXA Equitable are its affiliates.

Investments are subject to market risk, will fluctuate and may lose value.

*Periodic Investment Plans do not assure a profit or protect against loss in declining markets. To be effective, there must be a continuous investment regardless of price fluctuations. Investors should consider their financial ability to continue to make purchases through periods of low price levels.

Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from and independent tax advisor.

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