Staying on top of your investments can be daunting. But what if your wealth was carved in stone? On the island of Yap, wealth was stored in a “Fei” — a large donut-shaped stone up to 12 feet in diameter. The island had only three commodities — fish, coconuts and sea cucumber — all highly perishable. Only the Fei could store wealth and enable families to gather wealth and obtain credit. Still to this day, islanders use the stones for traditional or ceremonial exchange.

In today’s digital age, things are not as different as you may think. We still need wealth storage that is trustworthy, dependable and durable. We are heavily dependent upon our institutions to maintain wealth vehicles. In short, we trust an intangible system. If you look at the net worth of the typical U.S. household:

• 32 percent of our wealth is equity in our homes
• 16 percent is in 401(k)s and thrift savings accounts
• 11 percent is in IRAs and Keogh accounts
• 10 percent in is stocks and mutual funds, etc.

Surprisingly, we have seen the universe of U.S. stocks shrink dramatically during the past 20 years. The United States has witnessed a 50 percent reduction in listed securities while other developed countries have experienced a 50 percent increase over this timeframe, thus resulting in a listing gap of nearly 6,000 companies. Much of the decline in the number of U.S. stocks is due to mergers and acquisitions. As a result, we have more concentrated industries with larger, older, more lucrative companies who pay out dividends to shareholders.

While the number of ultra-high-net-worth individuals is increasing, there is still a gender gap in the United States. Almost 70 percent of men have made their own wealth, compared to 34 percent of women. Nearly half (48 percent) of women have inherited their wealth, typically as widows.

However, women do have an advantage when it comes to investing, according to recent research by the Wells Fargo Investment Institute. The study shows that while women often say they have low confidence in their ability to invest, their investment performance leads that of men on average when adjusted for risk, due to their patience, discipline and willingness to learn.

Whether you have inherited wealth or are creating your own nest egg, it’s never too late to start investing. Consider these tips to be a good investor:

• Manage risk rather than return. Risk is about more than volatility. Ask yourself which risks could have the greatest consequences for you personally and manage accordingly.
• Understand the long-term compounding of money. Every time you buy and sell a stock, you incur fees and capital gain taxes. When you buy a quality stock and keep it for the long haul, the money you would have paid in capital gains is instead potentially compounding your investment return — especially if the company pays dividends that you can reinvest. Over time, this can have a powerful impact. The earlier you start investing, the greater the potential power of compounding.
• Learn how commodities work. Commodities — whether they are agricultural, energy-based or metals — trade on supply and demand and are difficult to value because cycles are challenging to predict. Look for companies with competitive advantages that are sustainable and generate free cash flow consistently (after accounting for capital expenses). Companies that deploy their cash flow into strategic investments can be much more fruitful for long-term investors.
• Seek niches, scale advantages and inefficiency in active investments. Markets are efficient most of the time but not all of the time. So, determine the value of a business and invest when the opportunity is presented by market inefficiency and depressed prices. Price is what you pay, but the value of the business is what you will own over the long term. The best long-term investments tend to be niche businesses and businesses where scale can create a cost advantage.
• Challenge assumptions and be a contrarian. Be wary of the herd mentality. Consider buying a stock when others are panicking and selling their shares. Being a contrarian requires courage and also requires one to take the emotion out of investing.
• Look for change at the margin. Think of the proverbial canary in a coal mine. Look for changes happening that could disrupt an industry and consider the risk and opportunities that may come as a result.
• If you don’t know what you are doing, seek professional help.

No matter how you choose to store and invest your wealth today, think about your values and the legacy you want to leave for future generations. Consider the social, economic, political, religious and cultural circumstances that shaped your family’s lives and reputations, and what helped you succeed. Looking to your past can often help inspire your future.

Jim Steiner is president of Abbot Downing.