Investing with Care

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If you had to choose one word to describe female investors, it would have to be conservative. According to a new study by New York-based Simmons Market Research Bureau and co-published by, not only are women less likely to play the market than men, when women do invest, they are likely to avoid the riskiest routes.

Released in August, “Women and Investing� is the first in a series of five reports tackling women's use of financial services. Upcoming reports in the series, all of which use data from the Simmons' fall 2000 consumer survey of 31,576 Americans nationwide will examine women's use of credit cards, banks, loans and insurance.

The results so far show that women prefer to play it safe than to take risks with their money. Women are more likely to say they are “careful with my money� (31 percent of women versus 24 percent of men), which may be why they are less likely to own investment products than men. Women are also 25 percent less likely than men to own a mutual fund or keep a brokerage account. They are only 16 percent less likely than men to have an IRA, and they own savings bonds at the same rate as men. Even as IRA investors, women behave risk-aversely compared with men, letting banks handle their accounts rather than keeping them with brokerages or mutual fund managers.

Certain demographic factors are highly correlated with investing. For women, the leading predictors for purchase of investment products are education, household income, age and marital status. For example, women holding a graduate school degree are 86 percent more likely than the general population to own an IRA. Women who have a household income greater than $250,000 are 65 percent more likely than the general population to own one. Women between the ages of 55 and 64 are 50 percent more likely to have an IRA, while married women are 26 percent more likely.

While women are becoming better investors, the study still found that 14 percent of them agree that they “know nothing about finances and investments,� compared with only 9 percent of men. Yet for many, ignorance isn't a permanent condition. Older women have more confidence in their money management abilities than younger ones. Thirty-two percent of women age 55 and above are confident, compared with only 20 percent of women between the ages of 35 and 55, and 16 percent of those ages 18 to 34.

Gail Buckner, senior vice president at Boston-based mutual funds company Putnam Investments, travels around the country speaking about women and investing. She's not surprised by the study's findings. According to Buckner, women tend to focus on how their various financial decisions interrelate. “If their retirement account does not perform well, they think that affects their ability to help their kids buy a home,� she says.

Ironically, conservative investing habits can be risky if they translate into buying CDs or holding lots of cash, with their low to nonexistent interest rates, says Buckner. “There are big risks to being too cautious an investor, the biggest one being inflation,� she adds. However, all this may be changing. Just as wealth and education predict savvy investment habits, Buckner credits the growth of workplace retirement plans with educating women about investing.

The report suggests that because women live longer than men, they are sometimes forced, with little previous experience, to take responsibility for managing the family finances. Perhaps the next generation will be better prepared. Younger women who have already picked up financial skills through their participation at the workplace may constitute a new breed of lifelong female investors.

For more information, contact Evan Goldfarb at the Simmons Market Research Bureau at (212) 373-8932.

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Female college grads are more likely to put their money in investment products than those who graduated from high school.

Source: Simmons Market Research Bureau

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