Researchers are beginning to look at whether women invest differently from men.

Photo: Kevin McShane, NPR.org

How are we different from men? Studies of behavioral investing have found that women invest their portfolios more conservatively. Women generally have lower risk tolerance and do not tend to move in and out of their investments when volatility in the market is great. Playing the market with retirement funds is not an option for most female investors. Staying the course over time is their pattern, and this can lead to greater returns.

In a 2011 study about women and investing, commissioned by Vanguard, the following four observations were reported:

1. In the middle income category, women tend to join workplace retirement plans in slightly higher percentages.*

• Of those earning $50,000 to $74,999 in 2010, 78 percent of the women joined their plans, compared with 68 percent of men earning the same amount of money.
• However, those earning either less than $30,000 or more than $100,000 were less likely to sign up for their plans than men earning the same income.

2. Women tend to trade less often than men.*

• A review of 2.7 million IRA investors during the 2007-2009, a period that included a dramatic slide in stock values, showed that men were 10 percent more likely to move out of stocks in times of great volatility.
• After this downturn, the S&P ‘s 500 Index (of stocks) was up 56 percent from March 9 to Sept. 30, 2009. Note: March 9 was the low point of the market.

3. Women’s investments are a bit more diversified.*

• Generally, women have slightly more balanced investment portfolios in their retirement plans than men.
• In 2010, women had 10 percent of their balances in bond funds, compared with 9 percent for men.
• Women had 25 percent invested in balanced funds (both stocks and bonds) versus 22 percent for men.
• Broader diversification served female investors well during the market downtown in 2007-2010. In this period, 92 percent of women had an account balance that either rose or stayed flat, compared with 91 percent of men.

4. Women who invest in retirement plans tend to save more than men at the same income levels.*

• In 2010, women earning $50,000 to $74,999 saved 7.4 percent of their income, compared with 6.8 percent for men.
• Women have saved a higher percentage of their pay in seven of the last ten years.

Despite the factors listed above, women do not have more retirement assets than men.

Although women often display better investing habits than men, they do not have higher retirement account balances. Gender differences can lead to women having less retirement income on average than a more aggressive strategy might produce.

In comparing women’s and men’s retirement assets vs. need, the following points about women and their situation should be considered:

• Longer lives: Assets must support an increasingly longer period of retirement.
• Lower lifetime earnings
• Lower earnings growth
• Less wealth
• Lower levels of pension coverage.

So, being better investors than men may not add up to greater retirement fund balances.

What must women do to manage their investment assets to assure a more comfortable older age?

Because women earn less and live longer, they need to plan for retirement early and aggressively.

According to a survey on women’s investment patterns conducted by Merrill Lynch, they are not doing what is necessary to achieve financial independence in retirement. For example, 48 percent of women vs. 38 percent of men do not feel knowledgeable when selecting among investment options. Only 49 percent of women vs. 62 percent of men say the total amount of their savings and investments is greater than the amount they owe on consumer debt.

Two factors prevent many women from making investment decisions: experience and knowledge.

Given many women’s fear of investing and combined with their tendency to examine options thoroughly, some women may experience investment paralysis or at least hesitation. Men tend to move into the markets quickly. Women often just don’t move.

Are there ways for women to get over their inertia when faced with investing decisions?

To achieve understanding of financial issues and investments and move on this knowledge, many female investors like to have others working with them. One excellent learning tool is forming or joining an investment club.

Take Stock Investment Club, Lake County, Ohio. (Photo: Legacy Investing, Inc.)

When I first decided to learn about investing (in the 1970s), I found an investment club through friends and joined. The women were well-educated housewives whose husbands were community and business leaders, including a number of executives of financial institutions.

The “ladies” as we called ourselves then paid an initiation fee of $100 to cover costs of materials and contributed the grand sum of $25 per month to the investment kitty.

We studied hard and after a bit made our first investment. Each time we put money in a new stock, it was a group decision reached after much discussion and agonizing over the possibility of loss. This went on for many months.

After I had been in the club for about a year, the market tanked. But our investments held up. To our great surprise (and satisfaction), our husbands’ accounts had taken a nice dip down. We were ecstatic about our success. However, the men told us that it was just dumb luck.

It has been noted in a number of studies that the average women’s investment club outperforms the average men’s investment club.

Start today to plan for your future.

• Consider joining an investment club.
• Find a solid investment adviser to guide you along your path to financial independence.
• Create a sound financial plan and invest in a well-balanced portfolio. Review your portfolio and overall plan semi-annually at a minimum.

A well-diversified, semi-aggressive financial plan would probably be in sync with many women’s tendency toward more investigative and conservative market participation.

For those of you who are closer to retirement age, if you do not have the assets needed for retirement, start now. It is never too late to do something toward achieving your goals.

*How America Saves 2011, a study commissioned by Vanguard