I was recently asked how I felt about the new books coming out for women on money that are all pink and girly looking in their presentation. Was that necessary I was asked? Did it, in fact, cause women to feel talked down to? And, then, should they be.. talked down to? Are women as feeble on money issues as they often to appear to be? This last one really got me going! Here is my none-too-brief response:
While the 2001 study, Boys Will Be Boys, indeed indicated that men’s (and particularly single men’s) trading activity lowered their returns by approximately 1% over those of the female investors, we could reasonably conclude that women are better investors.
My 32 years of experience has shown me that women gather and process information differently than men, such that the incubation period for a female investor is far longer than that of men. Women often prefer to do their research and homework before they begin investing, such that their plan often rewards that research and intentionality with higher returns. With women’s inherent need to understand their investments and how each investment relates to the others and her overall plan, she will often make a buying decision and stick to it, which often bodes well with her return.
Most male investors on the other hand, tend to act more quickly, investing in the stocks their friends and/or the daily news “tips” them off to. Consequently, when the next “tip” comes along, some men would sell their first choice, and invest those proceeds into the second “tip” stock, not allowing their monies to remain invested anywhere near a full market cycle.
Remember, anyone can buy stocks, bonds or mutual funds; the real question is when to sell them. My experience is that women investors are more buy-and-hold investors than their male counterparts. All this said, I have spoken about women investors, which unfortunately represent a small percentage of women.
My goal is to introduce more women to investments, through educating them about their need to provide for themselves for longer actuarial life spans than men, as well as needing to stretch their lower earnings into nest eggs that will weather inflation over several decades. Women’s fear of loss of their principal investment often precludes them from earning returns that will indeed carry them through inflationary years. Socialization has contributed to mature women’s needs to protect and preserve. Without education then, older women may have deduced that investing in Certificates of Deposit would be smart, as it would protect them from “losing” principal. On the surface that seems logical. Yet because of inflation, if one invests only in guaranteed principal investments–like fixed annuities or Certificates of Deposit–we will be sending money ahead that will fall woefully short of buying the goods and services that we will need. That’s the bitter taste for me as an advisor, when I see a woman who has saved for years and years, yet her choice of investments failed her, such that she is sinking instead of swimming during retirement.
I am not inferring that men fully understand inflation and thus invest more of their money into the stock market. I rather think that more men find the allure of the stock market irresistible. Couple that with their propensity for competition and the result is that many more men invest in the stock market than do women.
So should women invest differently than men? Perhaps not. Yet older women seem to harbor emotionality and a sense of finality with their investments, whereas their male counterparts have been socialized to take risks and pick themselves up after their mistakes (much like in their team sports) and keep going with a confidence that “it’ll all work out in the end”. Many women lack that very confidence—that they know enough to invest in the first place, and that they can make a financial mistake and recover from it. While men’s knowledge may well be similar or lessor than that of their female counterpart, they tend to exude confidence, stating publicly that they know what they are doing, and feel comfortable about their investments. (I can only imagine that women fear that a team of ruler- wielding Certified Financial Planners or Certified Public Accountants will show up at their kitchen tables or offices and demand to see their history of investing activity to “grade them” on their investment savvy, such that they either clam up when surveyed about their money confidences or label themselves inept.)
Many Boomer Women have succumbed to their husbands’ singular handling of the check book and investments out of convenience and/or feeling that their husbands have more knowledge due to socialization and/or family money messages. Yet I’d be rich if I had a dollar for every time a husband pulled me aside and confessed, “I don’t know any more that she does, yet she thinks I should handle our money, so I have.”
Women and men need to open up running dialogues about their money, determine whether their money will last as long as they expect to live, and work together while both are alive, utilizing a fee-only financial planner to give them unbiased advice and recommendations at least once a year.
So should women be given step-by-step investment instruction, and cautioned about intertwining their emotions with their investments, and informed about the historic long-term returns of various types of investments so they can stretch their nest eggs out for their (longer) lifetimes? Yes, absolutely. Should it be pinked up or watered down or sugar coated? Absolutely not.
My penchant is educating mature women about their money and coaching them to adopt successful strategies. I choose to use analogies simply because it makes more complex topics easier to understand. Once I’ve conveyed the theme through story, I delve into the hard specifics of investing, and effective diversification and investing discipline–all of which require common sense, a trait most women are hard wired with. I delight in the ah ha moments that women invariably experience when they “get it”, when my expertise is translated and communicated to them so they can build on their own self-confidence and capabilities. Building relationship could be deemed pink, I suppose, and women do appreciate trusted relationships. Yet the myriad experiences of sitting aside their husbands years ago during their financial meetings and being summarily ignored by their financial advisors has hurt, and possibly contributed to their reticence to participate more fully in the family’s finances today. Any efforts to reverse that are appreciated, and yes, necessary.