It Takes Two to Invest Well

The financial challenges women face really do differ from those of men. That's because women tend to live longer and to have more-checkered work histories than men, moving in and out of the paid labor force more frequently. Even women who work full-time average fewer years of work experience than men, so they build up less seniority and their retirement savings lag.

If they stay at home to rear children, women often face a special kind of financial dependency. That's not always unwelcome, but it can work to their disadvantage and may be unsettling -- especially when you consider that about 40% of first marriages end in divorce and that the average age of widowhood among women in first marriages is 58. That means that after years of intertwining their financial lives with parents, spouses, children -- and parents again -- they often face the prospect of years on their own.

Mars versus Venus. Because their life experiences differ from those of men, women often look at the same financial products from a different perspective. Nowhere is this Mars-versus-Venus divide more apparent than when it comes to investing in the stock market. Over the past decade, few areas of personal finance have been dissected as thoroughly, and the results tend to be consistent: Far more women than men express a lack of confidence in their ability to invest. As a result, many women either don't do it at all or invest too conservatively.

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In a recent study by OppenheimerFunds, for instance, more than 60% of the women interviewed said they didn't know how a mutual fund worked, versus 41% of men. Within a household, women were more likely than men to pay the bills (60%) and balance the checkbook (67%). But only 25% of women -- versus 44% of men -- were responsible for buying and selling stocks, bonds and mutual funds. Another survey by Merrill Lynch found that women didn't enjoy investing as much as men and weren't as likely to try to beat the market.

Women are more educated, more involved in financial decisions and control more wealth than ever before. Yet a startling 90% of women interviewed in a study by the life insurer Allianz said they felt somewhat or not at all financially secure. While women want to preserve their assets, men figure they can make back their losses.

Teamwork. But a lack of confidence doesn't mean a lack of competence. As investors, women can actually be more capable than men.

In a study of investors at a large discount-brokerage firm during the 1990s, Brad Barber and Terrance Odean, of the University of California, found that female investors outperformed their male counterparts. Women trade less often, Barber and Odean found, and boost returns by saving money on commissions. Rather than gamble on a highflier, women usually do research before making an investment decision -- and once they choose a stock, they stick with it.

Barber and Odean attributed men's penchant for trading to overconfidence. The Merrill Lynch study found that men are also more prone than women to making other investment "mistakes," such as holding a losing stock too long or waiting too long to sell a winner.

What all this suggests is that, working together, men and women make a socko investment team. They complement one another, enhancing each other's strengths and compensating for weaknesses: You can pull him out of silver futures, and he can wean you from bank CDs. And as a couple, the two of you stand a much better chance of amassing the assets you need to enjoy a secure future -- together.

Adapted from Kiplinger's Money Smart Women (Kaplan, $15.95), by Janet Bodnar, deputy editor of Kiplinger's Personal Finance magazine. Available at retail and online bookstores including Amazon.com and Barnesandnoble.com.