Mo Vidwans
Women control over 51 percent of this country’s investable wealth, a number that is expected to rise to 66 percent by 2030 which is just 9 years away. Putting it in solid numbers, during the next several decades women will inherit approximately $29 trillion in assets, and they will need the knowledge and the knowhow to manage it. Some women will inherit assets from their parents as well as their spouses. Many others will accumulate wealth through their own professional and business accomplishments.
And yet there are concerns; not only because they will have to be on top to manage all this wealth coming their way but also because they have to get familiar with how to do it successfully in a big hurry. Unfortunately, women are not in the loop for one reason or the other. Besides that, ironically many women think they are terrible investors even though countless studies have shown that just the opposite is true.
Meredith Jones says in her book, “ Women of the Street: why female money managers generate higher returns” that women have a lot of innate behavior that gives them an edge and makes them exceptional investors.
Studies have shown that women are 10 percent less likely to sell when stocks are tumbling. Their cool-headed response is one reason why women’s portfolios outperform men’s on average 12 percent over the course of a year. Nevertheless, women are not immune to the ups and downs of markets, especially when markets crash. If women investors have a flaw, it could be that they are too conservative. I remember having numerous conversations with women clients where all they want to do is to keep their money in a money market account or at best in a CD.
Many women don’t invest outside of a retirement account either. They tend to keep almost 80 percent of their non-retirement savings as cash in a checking or savings account, according to the Fidelity study. The study also shows that the affinity for cash savings may be traced directly to women’s low esteem as investors. Only 24 percent in that same study felt comfortable enough with their knowledge of investing.
That is a crazy scene especially if the statement at the beginning of this article is going to turn out to be true. All of us have this responsibility then to get women in our lives up to speed so that they can handle the burden and the weight of that estate moving slowly upon their shoulders.
It is clear, then, that the knowledge of investing is worth acquiring. If for no other reason, it is because it will only help them in the long run. As it is, over the years it is established by the actuaries that women live longer than men and they, under most circumstances, end up inheriting all the assets of their family anyway. IRS tables for average lifespan for both men and women show the same thing; the average age for men is 84 and for women is 87 at the time of their death. So, it is also apparent that women need to understand enough about investing to keep tabs on the professionals or relatives/friends who would manage their money for them.
While it is true that the financial learning for women can start at any age, just like it does for men, it is best if that indoctrination happens at an early age which puts the responsibility squarely on the wide shoulders of parents. It depends much on how the children are brought up and how they are introduced to the idea of managing and investing money.
It is a somewhat different story as to how women face the dilemma of handling money. Generally, it happens two ways: one is they inherit the family assets when the male spouse dies. The other one is a bit more dire when they are single most of their life, handling everything on their own but still end up caring for many of her family members like aging parents or brother or even a dear friend. They even end up leaving their job to care for such people. The result of all this is that not only their own earning capacity diminishes but it also affects their retirement savings and Social Security payments.
Fortunately, those who wish to seek a remedy, help is available. There are courses and classes and even tutoring available if you seek them out. Of course, plenty of books are published on this subject but this is one area, just like math or music, where you just need a teacher to hold your hand for a while and guide you through the maze of financial matters. I have always offered free help to those who have a need for it and are genuinely interested. Generally, all that is needed is a strong and burning desire and time to put in your efforts.
One thing is for sure, women prefer investing in things which they understand. They must create that comfort zone first. Once they learn enough about investing in stocks and bonds, they do go for it and become experts over time. Many times, their comfort zone lies in the shares of companies whose products and services they know first-hand and that is just fine. That is how Peter Lynch at Fidelity managed the fabled Magellan Fund for a long time in the 70s and 80s ( One up On Wall Street: Peter Lynch). We all can do the same too; it really does not need any special knowledge to succeed.
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Mo Vidwans is an independent, board-certified financial planner. For details visit www.vidwansfinancial.com, call +1 (984) 888-0355 or write to [email protected].
