At a recent forum at the University of Virginia, hedge fund manager Paul Tudor Jones remarked that women traders lose focus after becoming mothers and breastfeeding their babies. A predictable flap ensued, and Jones backpedaled and then apologized.
Go ahead and roll your eyes, chuckle or stamp your foot, depending on your point of view. Arguing that there are differences in innate ability between the sexes always makes for trouble.
Research shows that men and women do approach money and investing differently. A classic study by behavioral finance academics Terrance Odean and Brad Barber found that female investors traded less often than their male counterparts, thereby cutting costs -- and boosting average returns by nearly one percentage point per year.
Economics professor Gary Charness, of the University of California at Santa Barbara, assembled data from a host of experiments to conclude that women are more risk-averse than men. Study participants were asked to choose how much of their experimental assets to allocate to a risky investment, with a payout at the end of the experiment based on what they’d earned. Given the choice, women invested less, keeping more for themselves.
And yet, women also tend to squirrel away more money. The Vanguard Group found that more women than men participated in their retirement plans at work, and women earmarked 8 percent to 11 percent more of their paychecks for saving. All of this is significant because women are now the principal breadwinners in four out of 10 families with children younger than age 18, reports Pew Research (63 percent of such women are single and 37 percent out-earn their husbands). The financial-services industry is taking notice of gender differences, and so should you.
For women, finding an adviser who speaks their language is key. Presentations that focus on a portfolio’s return, investment style, market capitalization and performance compared with a benchmark tend to resonate with men. But women prefer a more personalized conversation that focuses on goals.
Certified financial planner Eleanor Blayney sees it in her practice. “The husband says, ‘How am I doing?’ He wants an answer relative to an index, other funds, other clients. But the wife says, ‘What does this mean to my lifestyle? To my kid going to college? To our decision to take a vacation? To my retirement plan?’”
For now, the conversation in most financial-services venues is decidedly male-centric. The industry has launched a number of initiatives to tweak communications with clients and recruit more women into the field -- which should help everyone in the family play to their strengths.
Anne Kates Smith is a senior editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit tulsaworld.com/kiplinger.
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As a group, the seven bond mutual funds in the Kiplinger 25 fared slightly better, but still suffered an average loss of 3.1 percent.
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