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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 money?

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 put."

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 appealing--option.

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 knowledge."

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" by nature.

"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 realized.

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 sense.

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."



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