Thursday, September 17, 2015

Investing: What women are doing well, where we need help

"... researchers find that while women are taking control of household finances, they are no more prepared to meet long-term financial goals than they were a decade ago." -- Prudential Financial Inc.

Do women invest differently than men?

Several studies say yes, women do take a different approach to investing than their male counterparts. These reports also say that men and women would do well to learn from each other when it comes financial planning for the long-term.
How women approach money is a big topic of discussion in the investment brokerage industry these days as more working women near retirement and/or inherit assets from their mothers.

The largest wealth transfer in history (worth an estimated $8.4 trillion) is under way as Baby Boomers inherit assets from their elderly parents. A good portion of this wealth transfer is from 90-something mothers to their 60-something daughters.

So how are women -- single or married -- handling retirement and estate planning, inheritance and investing? And how is their approach different from men?

According to the National Center for Women and Retirement Research at, women are doing a lot of things right. That’s because women are more often in charge of household budgets. They are experienced at multi-tasking – juggling kids, work, bill-paying and planning. They make most of their family’s consumer purchases (85 percent). These responsibilities give women experience with money management.

As a result, women are more likely than men to research and ask questions before making financial decisions, they are more likely to work with a financial adviser and more willing to stay the course during turbulent market times, said a recent Fidelity Investments report.

“Overall, research indicates that women are more focused on comprehensive financial planning, while men tend to focus on investment returns,” said the report.

There’s more good news. Even though women are in and out of the work force and tend to earn less than men, they actually save a higher percentage of their income in tax-deferred retirement plans and are more likely to take advantage of catch-up savings opportunities once they hit 50.

But here’s the big difference: Despite a lot of money-management experience, despite a positive savings record, women are less confident when it comes to investing.

A Wall Street Journal report, “Male Investors vs. Female Investors” said that “while women believe in the value of saving, they don’t seem to trust themselves in the same way (as men) when it comes to investing.”

Wealth coach, Deborah Owens, often makes the same point in her online posts. "Your greatest risk is taking no risk," she says at #wealthyu. For more click here.

A Merrill Lynch study of 11,500 clients, said that 55 percent of women agreed or strongly agreed with the statement, “I know less than the average investor about financial markets and investing in general.” That’s compared with only 27 percent of men.

The Journal report said that women tend to have a greater portion of their portfolios in cash and are less willing to increase risk to seek higher returns.
This reluctance to get into the investment arena and to invest more aggressively may mean that women miss opportunities to grow their wealth and their retirement nest eggs over the long-term.

Meanwhile, men might gain by maintaining are more balanced portfolio instead of trying to win big on a single tech stock or other high-risk opportunity, advisers said.

Part of the reason for these differences may be because women have a longer time horizon than men.
According to the Centers of Disease Control, the average life expectancy for American women is 81.2 years while men can expect to live to an average age of 76.4.  Women now age 65 can expect to live another 20 years to age 85 while men age 65 will likely make it to 83.
A warning to all --- one out of every four Americans now age 65 will live past age 90.

Women, meanwhile, have a lot to be proud of --- higher business ownership, a narrowing wage gap and greater participation in retirement savings. But women still tend to invest too conservatively and worry too much. Women are twice as likely to describe themselves as financial “beginners,” said a recent Prudential Research Study.

“Women’s lack of confidence sometimes translates into disinterest,” said Kelley Holland in a report for CNBC. “Only 43 percent of couples plan for retirement together, and 80 percent of the spouses who were not involved are women. Given the high likelihood that women will outlive their husbands, that’s hardly a recipe for a comfortable retirement,” she said.

The experts agree that men and women could learn a lot from each other’s best investment habits. Men set financial goals and work to gain those goals. Women do the research and are less bothered by market ups and downs.

Investing for the long-haul takes determination, courage and confidence no matter who you are. So let the dialogue begin with our families, our financial advisers and the men in our lives.

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