Investing:

Crossing the
Threshold of
Confidence,
Identifying and
Reaching Goals
Chapter 6

Gender Differences
Just as we see gender differences in
money in the way we spend,
personalities, etc, we see these
differences making themselves evident
when it comes to investing $.
At the heart of these gender differences
is the notion of confidence.
Far more women than men express a lack
of confidence in their ability to invest,
causing the women not to invest at all or
to invest too conservatively.

Gender Differences
In a recent OppenheimerFunds, more
than 60% of women said they didnt know
how a mutual fund works versus 41% of
men.
Within a household, women are more
likely than men to pay the bills, balance
the checkbook, and maintain the family
budget. But only 25% of women are
responsible for buying and selling stocks,
bonds, and mutual funds.

Gender Differences
Merrill Lynch determined in a survey that
women dont enjoy investing as much as
men and arent as likely to try to beat the
market.
Charles Schwab: When the brokerage
firm looked at portfolios of its clients, it
found that women were more likely than
me to have $ in bank certificates.

Women Make Better

Investors
Lack of confidence does not mean
lack of competence.
Women are more likely to research
and ask for assistance then men
before they make investment
decisions
Women tend to be bargain
hunters while men are risk-takers

Gender Differences Possible

Explanations
According to the Womens Cents Survey
conducted by the National Center for Women
and Retirement Research, women tend to be
present thinkers.
Personal experience plays a part in why the
gender roles manifest as they do:
Women work fewer years by the time they are 40 (on
average 3.2 years less)
To some degree, women are dependant on their
husbands (risky business considering divorce rates and
average age of widowhood and life spans)

Gender Differences Possible

Explanations
According to the Dreyfus Gender
Investment Comparison Survey, men
are far more likely than women to
feel that they have control over their
financial lives.

Women Make Better Investors

Even though they express less confidence
in their investing ability, women investors
often outperform men, largely because
they trade less frequently.
And, as they become more experienced,
they also become more confident.
In short, lack of confidence does not
mean lack of competence.

Women Make Better Investors

So whats the secret:

Women are more likely to do research

Dont trade as frequently verses male
counterparts
Men tend to make other investment
mistakes such as holding a stock too long or
waiting too long to sell a winner
Men are more easily seduced by the market
Women are bargain hunters Men tend to
be risk takers (men are 2 xs as likely to buy
on a tip.

Why the Hand and Glove

Makes Sense
Given these gender attributes, it
makes sense, then, to work together
and compliment each other as you
chose investments. Enhance your
strengths and play to your
weaknesses.
So how are you going to handle
and play off of these gender
differences?

Stocks are Gender-Neutral

Although men and women talk about
investments in different terms, investments
themselves dont discriminate. Stocks,
bonds, and mutual funds are genderneutral. They work exactly the same way
no matter who owns them. If you know
how to use them, you can make them
work in your favor. Knowledge is power.

Invest for the Short Term

A short-term goal is anything you
want to do, buy, or spend money on
in fewer than five years.
Keep your money liquid
Meaning that you can get your hands
on it quickly and without penalty if you
need it

Invest for the Short-Term

Garden-Variety Bank Savings
Accounts
You wont get rich on the interest you
own but they are convenient and the
money is insured by the FDIC

Bank Certificates of Deposit

Pay a higher rate of return then savings
accounts but tie your money up for a
certain about of time

Invest for the Short-Term

Money-Market Mutual Funds
Get the best interest rate on a short-term
deposit, money-market mutual funds are
generally the place to be. Instead of
investing in stocks, these mutual funds invest in
the money market, a collective name that
describes all the different ways in which
governments, banks, and corporations borrow
and lend money for short periods of time

Invest for the Short Term

Other short term investments
Short term bond funds
Treasury Bills IOU from the govt

Invest for the Long Term

For investment purposes, a long-term goal
is anything that you want to do, buy, or
spend money on more than five years
into the future. Of course, long-term is
relative.
College savings plans
Retirement Plans
Saving for a major purchase can even be a
long term goal by a house by 30, etc.

Invest for the Long Term

Some considerations:
Diversify, stocks, bonds, mutual funds,
other savings vehicles, real estate
Beware of being too conservative.

Invest with Confidence

3 Key Considerations

- Age old theory on portfolio management

stocks in your portfolio should be 100 minus
your age
Keep All Things in Proportion
Stocks: 40% - 80%
Bonds: 20% - 50%
Cash: 10% - 25%

Invest Slowly and Steadily the ERA Stick

with a Plan
Dollar Cost Averaging (Wanda)
Choose Your Level of Risk and Diversify

Pick Stocks
Educate Yourself on the Market Where and
How might we do that?
How Much Does the Company Earn?
This is the famous bottom line, the companys net
income after taxes, expenses, and set-asides, often
expressed as earnings per share (EPS) of common stock
outstanding. Successful investors look for a strong
record of rising earnings.
For Example - Microsoft
http://www.microsoft.com/msft/financial/default.mspx
http://www.microsoft.com/msft/download/Income%20
Statements.xls

Pick Stocks
How Does the Price Relate to Earnings or
P/E Ratio?
Divide the current price of a stock by its
earnings for the past 12-month period and
you have the price-earnings ratio (P/E ratio).
P/E ratio tells you what investors think of a
particular stock compared with other stocks
with an especially high P/E. Buy at a low P/E.

What is a Companys Book Value?

The difference between its assets and its
liabilities (Net worth) or shareholders equity

Pick Stocks
Whats the Return on Book Value?
Return on Equity

Companys total annual net income as a

percentage of total book value, and you get a
measure of how much the company earns on
shareholders stake in the enterprise. Use this to
compare the company to other companies in the
same industry

Whats the Total Return?

How much you have made on share price

including dividends
http://www.microsoft.com/msft/FAQ/dividen
d.mspx

Finding a Stock broker

You can go with online brokers to full
service brokers.
Online brokers: www.firstrade.com
Full service brokers: www.ml.com
www.smithbarney.com

Mutual and Index Funds

Mutual Funds might be an alternative to you
verses individually picking stocks:
Numerous types of mutual funds:

Aggressive growth funds

Growth funds
Growth and income funds
Sector funds
International funds

Index Funds assemble portfolios designed to

track one or more broad stock of bond indexes
that duplicate as precisely as possible all the
stocks in a particular sector of the market or as a
whole. For example: www.vanguard.com

Invest in Bonds
When you buy a bond, you are basically lending
money (like the federal govt, local govt,
businesses) to whoever is issuing the bond. In
return, the issuer gives you an IOU promising to
pay back the money, plus interest, over a
certain period of time.
Bonds historically have a lower payout than
stocks over time but are not as risky.
Come in handy for the following reasons:
Relatively safe
Come in different maturities
Pay interest

Real Estate
Yet another way to build up an
investment portfolio. Remember
real estate markets are local
Research and learn your market.
Real estate investment property can
be a lot of work
REIT might be an option for you.

Where to go to look for

answers to your questions

Financial Planner/Advisor
Accountants
Lawyers
Banks, stock brokerage firms, credit
unions, etc.
Continuously educate yourself through
venues such as WPB, investment seminars,
online services like Smith Barneys Women
and Company.

Dont Stop Now!

Decide whether youd get a better return
at this point by paying off debt or
investing.
Identify your short-term and long-term
goals. Be specific
If youre married, take advantage of your
respective strengths and inclinations as
investors so tat you can achieve your
mutual goals

Fiscal Wake Up Tour

A prelude to saving for retirement
featuring David Walker, Former
Comptroller General of the United
Sates.

Dont Stop Now!

To get started the easy way, check out
one of the low-cost investing options
Join an investment club for education
and encouragement
Revisit your 401(k) or IRA, if you already
have one, to ensure that you havent
chosen investments that are too
conservative or too risky for your goals