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Girls just wanna have financial security -- Page 2

Women the smarter investors?
A different study, conducted for Merrill Lynch Investment Managers, puts the best possible spin on women and investing: "Women make fewer investment mistakes than men and make them less often -- despite the fact that, on average, they tend to know less about investing and enjoy investing less than men."

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That's strange praise, meaning something like: Women are savvier, but more ignorant than men.

Based on a telephone survey of 1,000 investors (divided equally between the genders), the study is skewed to more affluent investors. Respondents had annual household incomes of at least $75,000 and assets of $75,000 or more.

Among its findings: "Women are far less likely than men to hold a losing investment too long (35 percent of women reported having done so at least once vs. 47 percent of men) or wait too long to sell a winning investment (28 percent vs. 43 percent). Men are also more likely than women to allocate too much to one investment (32 percent vs. 23 percent), buy a hot investment without doing any research (24 percent vs. 13 percent), and trade securities too often (12 percent vs. 5 percent)."

On top of that, men are more likely than women to repeat their mistakes.

OK, so men are foolish in some respects, but they enjoy the investing process more than women (69 percent vs. 55 percent), and they don't mind spending time at it. Most women, 60 percent, would like to spend as little time as possible managing their investments, while relatively fewer men -- 49 percent -- feel that way.

So what do these women do? They seek advice (read: they stop and ask for directions), and that's what makes them "savvy investors."

That study also explores the role of human emotions in investing. Survey respondents were asked to identify the emotions that affected their investment mistakes. To a larger extent than women, men cited greed (32 percent vs. 16 percent), overconfidence (33 percent vs. 20 percent), and impatience (28 percent vs. 19 percent) as emotions that interfered with their investment decisions.

The takeaway
What can we learn from these studies? Is there an underlying, biological explanation for the differences in the way men and women invest? Could hormones play a part? I have no doubt that too much testosterone leads to overconfidence in investing, while not enough leads to a lack of confidence.

All kidding aside, let's look at the sociological perspective. Not to make excuses, but women traditionally find themselves mind-numbingly busy due to the multiple demands of work, family or both. At the end of the day, women drop from sheer exhaustion after tending to everyone's needs before their own. I know I'm stereotyping here, but these are documented facts! And a lot of us drop out of the workforce for several years at a time to tend to our young ones, setting us back even more. Retirement plans become a back-burner concern, and that comes back to bite us.

The biggest bugaboo defeating us is that significant income disadvantage. How can we even hope to beat men at the investment game when we have a fraction of the resources to work with? If we earn 80 cents on the dollar and save a smaller percentage of our wages than men, we can't keep up with, much less supercede, men at that game. If we earned as much money as men, that would help to level the playing field.

We can approach our bosses and demand to get equal pay for equal work. That's what we should do -- at the time we're getting hired. But no matter what our economic situation is and how we got there, we must put the retirement plan issue before us, front and center. Whether we seek the help of professionals or do it ourselves, we must take steps to adequately prepare.

It's the only way we can face our golden years -- with confidence.

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning.

If you have a comment or suggestion about this column, write to Boomer Bucks. If you have a particular financial problem that you would like addressed, please send your queries to Dr. Don, Tax Talk, the Real Estate Adviser or the Debt Adviser.

-- Posted: July 27, 2005




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