Family Money Values

Women Investors

by · March 7, 2012

Who makes the investment decisions at your house? How are your financial duties divided up between your spouse and you? If you manage the day to day money and hubby deals with investments, you are in the majority and I challenge you to change.

Research has shown that men and women have very different investment styles. In Smart Women – Smart Investors CBS.com reported on the study done in 2000 showing that men tend to be more frequent traders and women tend to buy and hold. Because more frequent trades cause expenses to mount, women investors tend to do better over time.

My Dad started trading after we kids moved out. He placed orders with a full service broker. He liked the volatile stocks – like gold, aluminum and copper mines. Some years he made more than his working salary, other years he lost that amount.

Mom took over managing the investments at Dad’s death. She didn’t trade. She consulted with that full service broker, diversified the holdings and grew her portfolio to over half a million dollars. Mom did better than Dad over time. She bought and held.

Famous Women Investors?

When we think of investors, we think of names like Warren Buffett or Peter Lynch. Do women’s names come to mind? Not really, yet there are some famous women investors.

Geraldine Weiss was called the Grand Dame of Dividends in the 1960’s. Her mother and father were both investors, she was exposed to the talk growing up. Were you? Do you expose your daughters to investing lingo and examples?

Weiss studied and tested Benjamin Grahams value investing techniques, then tried to get a job with brokers or research firms without success. Women weren’t hired for those types of jobs in those days. Since no one would hire her, Weiss went out on her own and started an investment newsletter IQ Trends in 1966. She recommended investing in companies that pay dividends that grow each year – but she only recommended buying when the price is low.

Weiss has written two books on investing as well, The Dividend Connection: How Dividends Create Value in the Stock Market and Dividends Don’t Lie: Finding Value in Blue-Chip Stocks.

Womens News reported on a Museum of American Finance display in 2009 which highlighted 10 famous Wall Street Women. The display not only highlighted women on Wall Street, but also promoted and encouraged financial participation by women.

Of course, you have probably heard of the Beardstown Ladies who formed an investment club in 1983, The Beardstown Business and Professional Women’s Investment Club. They claimed that their investments returned more than 23% a year between 1983 and 1994. They also wrote a couple of books, including The Beardstown Ladies’ Common-Sense Investment Guide: How We Beat the Stock Market-And How You Can, Too

If you are interested in starting an investment club (or finding out what one is), check out a post I wrote for Broke Professionals: Should I Start a Family Investment Club?

Why Bother With Investing?
Women, as a group, still earn less than men. If all you do is save the money you earn (especially at today’s near zero savings interest rates) you will never grow your money. You need to grow your money to keep up with inflation as well as to make sure that your financial needs are met.

You may be better at it than your spouse. As noted above, studies have shown that women take a more long term view and take fewer risks, generally resulting in higher returns over time.

You have a right to financial control. You don’t have to relinquish control of the financial decisions to your guy. Women earn at least a third of household income today and in many families are the main breadwinner, but even if you aren’t the breadwinner in the family, you may have more time, more ability or inclination for investing.

You owe it to your daughters. Our parents tended to avoid teaching us about finances and investing, socializing their sons in those subjects instead of us. In order to teach and show your daughters that investing is something women do, you must demonstrate by investing!

You will most likely need to do it later anyway – you statistically live longer than your spouse. Don’t wait until your spouse dies to learn, be active now when you aren’t burdened by grief and other concerns.

How I started investing.
When we were first married and for a decade after that, there was no money left over after expenses to use for investing. We first built up a savings account (to handle those nasty little financial emergencies that come up); bought life insurance on each of our lives; and saved up for a down payment on our home.

Before you even think about investing, think about building such a safety net. You should have things in place like: an emergency savings fund; insurance (life, heath, house, etc) needs met; and basic living expenses covered. Most times it makes sense to pay down or eliminate debt first too, but in today’s low interest environment, you need to think through this one.

When I was ready to start investing, Mom and Dad helped out with a few stocks, bonds and mutual funds. I began to consult with the full service broker that they used. He loved to educate, so before he would put any transaction through, he would explain the security, why the firm thought it was good, how it behaved, and etc. In addition, I studied a set of exercise manuals that Dad got with his mail order Investment study guide (this was before internet days by the way) and read other books to continue learning about financial items. Of course, I worked for a mutual fund company so I was also exposed to financial concepts at work as well.

At the same time you are putting your safety net in place, consider learning about personal finance and investing concepts – if you haven’t already. I’ve listed some resources to help with that at the bottom of this post. The information is much more readily available today.

After you have built up your safety net, and become financially literate, start investing – using only money that, if lost, won’t cause you undue grief. It might make sense for you to start investing with mutual funds. They have a low entry threshold and provide a lot of diversification. I have pick ones with a low management fee that follow one of the market indexes. You can pay for a consult with a financial planner, you can pick a full service broker and let them help you pick stocks, bonds, funds and etc or you can study the companies and funds yourself to decide what you need.

Today I own municipal bonds (federally tax free!); bond funds (corporate, muni, global, domestic, long term and short term); large and mid cap stocks; mutual funds with a variety of objectives – including global and international diversification – as well as keeping that emergency fund and liquid assets for other purposes. In addition, I am looking into increasing the amount I invest in the real estate sector.

Some research has shown that diversifying your investments through asset allocation (investing in different sectors so that when prices in one sector go down, they hopefully go up in another – thus keeping your overall portfolio value consistent or growing) is the best method of growing your investments. I have a target allocation for each sector and I re-balance each year.

Women are investors. You can be an outstanding investor.
Investing isn’t brain surgery. You don’t have to be a day trader to invest. You don’t have to spend gobs of time or money to invest. You can do this. I think you should do this – once you reach the right place in your finances.

Do you handle the family investments?  How did you get started building your portfolio?

This post is part of Women’s Money Week 2012.

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