Women have broken down plenty of barriers over the years, in everything from the professional world to the political arena.
But there's one line that many women are still reluctant to cross: Becoming investors. Women's lack of engagement in investing really came through at Northstar's Successful Investing for Women workshop last month. Please join us in our next workshop "Money Fears and What to do About Them" on Wednesday, May 15.
Participants shared with us that in many cases, investing had been the province of their husbands. Not surprisingly, these women said they lacked a clear understanding of their financial picture—where all of their investments are, how they are invested, even how much they are worth.
Some candidly shared concerns that their partners had made rash investment decisions. And many shared anxiety about the lack of a long-range financial plan.
Ironically, the concerns that the participants expressed—a desire for long-range planning, responsible decision making and a clear view of the whole financial picture—suggest that they themselves are well-suited to be successful investors!
Studies have shown that in certain fundamental ways, women are more cut out than men for investing. We are very practical about identifying and meeting long-term goals, for instance, and we are less prone to impulsive decisions.
A 2001 study by economists Brad M. Barber and Terrance Odean found that men were 45% more likely than women to make frequent trades. And that undisciplined behavior resulted in annual returns ofnearly 1% less than those achieved by women in the study.
There's no question that women are skilled with money. We are typically the ones managing household budgeting and finances, after all. Yet when it comes to investments, it's still, so often, "hands off."
If you're a woman, I'd like to challenge you to rethink your level of engagement in investing. One reason is that you'd likely be good at it. Another is rooted in statistical reality: According to 2008 U.S. Census data, women live five years longer than men on average. In all likelihood, you will eventually be forced to be in charge.
Now, I acknowledge that the idea of taking charge of investing responsibilities, or even sharing in those responsibilities, can be intimidating at first.The topic can seem overwhelming, mostly because of financial advertising and the blizzard of information in financial media.
But in my experience, it's actually a rather straightforward business, and women do well once they get engaged. The key is to demystify investing. We plan to use our next few blog entries to start doing exactly that—so stay tuned! In the meantime, I invite you to think about your level of engagement in investing. What's keeping you from crossing that barrier?
If you have any questions, or would simply like to discuss this topic further, feel free to reach me at 603.458.2776 or email me here.