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Women and Men and Investing

Kathy Courtney

Over the years I've talked to a lot of women, have seen their postings on the individualinvestor.com message boards (Warning! Generalities ahead!) and the following are the impressions I've developed during that time with regard to women and men and investing. I'm probably going to push some buttons, but hey, disagreement is the seed of healthy discourse, so here goes.

Most women are more conservative investors than men. We don't buy on tips from friends and we don't trust brokers. We generally hold investments for longer periods of time, while men trade more often; I've not run across too many women day traders, for instance. Many of us are single parents. Many of us are the sole security builders for our families, so we don't want to invest in anything unless it is a "sure thing"‹or as close to it as we can get.

Why? Why aren't more of us day traders? Why don't we take greater risks? I mean, we're living in this 'enlightened' era, right? What's the hold up? Well, I believe women are more intimidated by money than men, and that we are more afraid of making mistakes with our money. We don't earn as much, dollar for dollar, as men and have less in our pensions and 401(k) plans. In fact, according to 1998 U.S. Department of Labor figures, among retirees 55 years of age or more, 55% of men received retirement benefits in 1994 versus just 32% of women. And according to a 1996 Congressional General Accounting Study, 31% of men aged 51-61 own stock versus just 17.3% of women. It's one thing, a good thing, I think, to be a conservative investor; it's quite another thing to be so conservative you don't invest at all.

But there is light in the shadow of those discouraging statistics. Recently I have read several great articles with some interesting statistics about women and investing. First of all, the good news is that women overall are better investors than men! (I knew that!) Individual Investor had a great column on this subject (Why Can't A Man Invest More Like a Woman?, March 2000). It said "women are more patient and more rational investors than men, who tend to be trigger-happy risk takers. Why does it matter? Women get better returns." So though more men than women invest, of women who do invest, something is going very, very right.

Women, as well as men, face many financial issues, which can include retirement, widowhood, divorce, supporting spouses and children, caring for elderly parents. Women invest as though their lives depend on it. The average age of widowhood is 56. (That's young! I was widowed at 54.) and there's a high rate of divorce, so women are becoming, later in life, the main breadwinner for their households. Women know they can't afford to make costly mistakes with their money. Though they still earn less and have lower pensions than their male peers, they appear to be much better educated today than in the past, and with careful planning and diligence, have built up sizable portfolios, mostly of high-quality blue-chip stocks.

It seems a woman's 'traditional' role has been to let her man handle the finances, but this should NOT be the case, because nearly half of first and second marriages end in divorce, women live longer than men, and women earn less pay than men.

In general, women are goal-oriented, ignoring hot tips. They do a lot of research and are more willing to call upon the experts for help than are men‹though we'll more often turn a deaf ear to a broker's cold call, we'll work hard to develop that relationship with our financial adviser. And here's an interesting little tidbit: Single-sex investment clubs show women's returns are higher than men's by about 5%.

Women are also more price-conscious and more apt to buy a stock at a lower price; willing to wait until the stock lowers in price, such as in our current market. For example, I waited until Cisco was at it lowest today, and I bought some more. I was unwilling to buy it at $80, so I waited.

Women are more rational than men in making decisions. They are less likely to buy on whims or let their judgment be clouded by comparing returns with those of other people. I think men are more inclined to brag about their accomplishments. (Hmmm. I bet I made a lot of friends with that comment!)

When you add up these three factors, it would seem to me that women better learn how to take charge of their finances. Women need to become more prepared so that when an emergency occurs, such as a spouse's death, divorce, illness, the women can take over immediately. I personally have had friends that have not had a clue on how to balance their checkbooks, and when their husbands died, they were in deep trouble. One friend went through all of her husband's retirement money in the two years after he died; he was a physician, so that was quite a nest egg. She had to return to work (she took a menial job because she had no training) and she's still in trouble after many years.

In my case, when my first husband died suddenly at an early age, our finances were not in order. In fact, we had NO savings at all. I had two young girls to support and so I had to learn from scratch. The first thing I did was get help from the company I was working for. They had financial forums to show us how to increase our income and build our portfolios. So, with their help, I began investing 20% of my salary into the company's mutual funds. Later on, as I gained more confidence in my own decisions, after doing extensive reading and research, I started to invest in individual stocks, mostly through DRIPs. At the present time, I no longer own mutual funds; I have created my own mutual fund. My portfolio is diversified and most of my investments are large-cap, blue-chip stocks. I have a few small-caps, which comprise a minor portion of my total investments, and so far, my portfolio has grown each year since I began investing. I avoid penny stocks, as well as tips from friends, as they usually go sour. I also find that expensive stocks with no earnings are not for me. Through my DRIPs, I dollar cost average, and feel that compounding is the best way to build up a solid portfolio over a long period of time.

Let's face it: You hire an accountant to do your taxes, a physician to take care of your health, a plumber to fix your leaky sink‹why should your finances be any different? This must be a priority for women if we are to take charge of our lives. In my opinion, the best time to start educating your children about money is when they are only about 8 or 9 years old, the sooner the better. By the time they reach high school, they should be learning about personal finances and investing.

Fortunately, I had a great father who taught my sister and me all about those things. I took his advice seriously and started saving at an early age. He bought both of us five shares of stock when we were in high school so we could see how the market worked. That was the start, and his advice was there for me; it was a place to begin when I was widowed. But I was lucky. Everyone isn't.

So come on girls, let's set some meaningful financial goals for ourselves for 2001: Let's become better educated and gain more confidence in our financial endeavors, so that our retirement portfolios will match, and even exceed, those of our dreams‹and our male counterparts!