On Being a Woman
How Our Differences Shape Our Investment Techniques
By Nicole Alper
Come on, we all know it's true. Our mothers say it. The psychiatrists
analyze it. And of course John Gray spelled it out in a series
of bestselling books.
Men and women are different.
And despite the stark--even cloying--quality of the cliché,
buried somewhere in this simple declaration there is, I believe,
a weighty nugget of truth.
So the issue then is, how are we different, and how do those
differences influence the way we handle, namely invest, our
According to Ruth Hayden, author of How to Turn Your Life
Around: The Money Book For Women, many of the more appealing
"female" characteristics, such as patience, tenacity,
and pragmatism make us better investors than men, once we
actually get started.
"Women have an intuitive sense. They are practical and
understand that things work in stages and are therefore comfortable
with volatility. And once they're in the market, they'll stay
If a woman's patience is her virtue, then riding out the
peaks and valleys of an ever-changing market should be her
pay off. After all, according to most financial planners,
it is those investors who stay in it for the long-term who
reap the full benefits of the market.
But the down side of thoughtful investing is that it leaves
the rapid return philosophy in the dust. How can a woman who
takes her time investigating her investments hope to make
the immediate--and sometimes more lucrative (at least in the
short-term)--return bestowed upon those who buy and sell within
a day, an hour, a minute?
The answer is she can't. But that's okay.
For women in the trading world, rapid return investing is
a way of life. But for the average woman who has a decent
job, perhaps a boyfriend, maybe a husband, and perhaps only
a loving cat, this kind of playing the market is not a viable--or
That's where patience pays off.
But according to a survey on women's investment patterns
conducted by Merrill Lynch, women are not doing what they
need to for total financial independence and retirement. In
fact, far from it.
The statistics are worrying: 48% of women vs. 38% of men
do not feel knowledgeable when selecting between investment
options; and only 49% of women (vs. 62% of men) say the total
amount of their savings and investments are greater than the
total amount they own on any consumer debt.
Women, because they earn less and live longer, need to be
planning for retirement early and aggressively.
Given a degree of investment fear, combined with a tendency
to thoroughly examine investment options, the result for some
women may be a kind of financial paralysis--or at least hesitation.
Ruth says this is more common than people think. "Men
jump in fast. Women often just don't jump. There are two things
that prevent a woman from getting started: experience and
So how can those women fill the black holes in their financial
understanding and learn to take the leap?
This made me think. Do women tend to be less daunted by financial
planning if they attack the investment beast with a partner?
Professor Hersh Shefrin, the Mario L Belotti Professor of
Finance at Santa Clara University and author of Beyond
Greed and Fear: Understanding Behavioral Finance and the Psychology
of Investing, agreed that popular psychology studies depict
women as "more collaborative" and "sharing"
"What we do know," he continues, "is that
the average women's investment club outperforms the average
men's investment club."
Given that bit of insight perhaps one good way for women
to make the most of the market is to study and play it together.
The golden key to women's financial success may rest in treating
investing like a guy treats baseball: an excuse to get together,
peer into the game, and hoot and holler when the right flick
of a wrist, trajectory of a ball--or rise of the market--is
I know from personal experience. Many of my friends watched
my entrée into the market with distant and curious
skepticism. It wasn't until three different women tentatively
suggested that we invest together that it all began to make
They weren't so much afraid or unfamiliar with the market
so much as they preferred to think of investing as a group
exercise: they wanted to make making money fun.
Well, shouldn't it be?
But of course making money is most fun when it works--and
for that to happen you need a solid, well-balanced portfolio.
According to Professor Shefrin, "women should pick a
sensible mix of index funds, including bonds and foreign stocks,"
in order to achieve their goals. "They need to invest
for the long-term and limit the amount invested in individual
stocks to under 10% of their portfolio."
A well-diversified, semi-aggressive financial plan would
seem to be in synch with many women's disposition towards
more investigative and conservative market playing.
"But the same advice applies to men," Professor
Shefrin insists, "only more so."