Gender Gap in Investing?

According to two independent studies, income and demographics are better indicators of investor optimism than gender. With more than half of all women (56%) surveyed making the majority of investment decisions for their household, the studies show that women feel as assertive as men when it comes to investing their money, and, given a level playing field, tend to behave the same as men in investing.

According to Paine Webber's special report on "Women and Investing " , women investors are generally optimistic about personal finances and government policies affecting the investment climate. Based on data from the Index of Investor Optimism, a quarterly poll of investor attitudes, the special report indicates that male and female investors think and behave similarly when their assets reach a significant level ($100,000 or more). Hence, the gap in investor optimism, first identified by the Index in January 1997, is more apparent than real.

In fact, differences in financial characteristics and other demographics, not gender, may explain variances in perspective between men and women on a number of investment-related subjects, the study showed. According to the Index, 42 percent of U.S. investors are women. Yet Index findings show that while women begin investing at about the same age as men, they tend to have lower incomes, fewer assets and less education than their male counterparts. When adjustments are made for differences in asset holdings, the remaining gap between male and female investors involves economic factors and is largely among investors having $40,000 or less of investable assets.

Male and female investors are similar in the following ways, according to the Index special report:

• Men and women investors with assets of $100,000 or more consider a 10 percent rate of return to be good.
• Men and women with assets of $100,000 or more are substantially more optimistic than other investors.
• Levels of optimism among women with less than $100,000 are closer to those of men with similar means than to those of other women.

Among the areas in which gender differences exist are:

• Female investors are more likely to compare their investmentswith the previous year's performance (37 percent), compared with men who benchmark against the Dow Jones IndustrialAverage (19 percent).
• Women tend to have lower risk portfolios, and hold a higherpercentage of bonds than stocks and mutual funds.
• Women are more likely to have investment advisors (56 percent) than men (46 percent).
• Most couples have taken steps to insure that if one partner dies, the survivor is not severely affected financially. Still, the Index shows that more than one in four wives would be severely affected if their husbands died, compared with one in six husbands.

"Our research shows that women have many of the characteristics that make for exceptional investors," said Mary C. Farrell, a Paine Webber senior investment strategist. "They have a goal-oriented approach, which leads them to focus on the long-term and ride out market fluctuations. What's more, Index research shows that women increasingly are taking the lead in investment decision-making. This trend is especially important given that women live longer, are more likely to care for aging parents and are in and out of the labor force more frequently than men. It shows that women are taking responsibility for building a solid financial foundation. "

Ms. Farrell said that education is the key to enhancing women's investment confidence and abilities. "The Index shows that most female investors -- roughly three of four -- do not have short-term investment targets or mid-term investment goals . But financial security requires advance planning. As their monetary needs continue to increase, women must take responsibility for broadening their financial knowledge. In turn, the financial services industry must respond with programs that support women in their efforts to become more knowledgeable about investing."

Quicken, the personal finance software maker, also released a study that shows women investors today feel just as powerful and confident as men when it comes to investing in stocks, bonds, and mutual funds In addition, the Quicken study shows that women choose to invest in similar securities as men. For the 56% of women who claim to be the primary investors in their household, the most popular investment choice is the 401(k) plan:

• 401(k) plan 37% (vs. 44% men)
• Mutual funds 29% (vs. 32% men)
• Stocks 28% (vs. 30% men)
• Bank certificate of deposit 23% (vs. 21% men)
• Bonds 15% (vs.16% men)

As women increasingly take on the role of money managers for the household, they appear to be motivated by the same forces as men "says Suze Orman, author of The Nine Steps to Financial Freedom from Crown Publishing. "The feelings of empowerment and confidence that come from managing your money are universal. As women become more comfortable with this aspect of their lives, they move one step closer to financial freedom."