Fear of commitment - to investing

Although more are confident in handling their money, women remain challenged in making it grow.

Every Monday afternoon at 5:30, Stacy Klein and a dozen other young women at Scripps College in Claremont, Calif., gather for an unusual meeting. Instead of discussing classwork, they talk about stocks, bonds, dividends, and price-earnings ratios. As members of the Student Investment Fund, a student-run investment club, they manage a $200,000 portfolio originally funded by an alumna's gift.

"Each person in the fund watches two stocks and presents news about those stocks weekly," explains Ms. Klein, vice president of the group.

It is the kind of early financial education that investment experts regard as crucial in helping women overcome a lingering hesitancy about investing. Yet this early training is not happening in any systematic or widespread way, they say.

A new survey of the investment expectations of several hundred students at 10 colleges finds that although women express more confidence than in a 1996 survey, they still lag behind men. That can leave them with diminished financial returns.

"Younger women do not expect to take on as much risk as men do," says Rosemary Cunningham, an economics professor at Agnes Scott College in Atlanta and author of the study. Only 37 percent of women would be willing to take risks, compared to 56 percent of men. "That portends a lower living standard for women in their later years."

At the same time, social and economic shifts are increasing women's need for a strong financial base. A study released last week by Americans for Secure Retirement shows that women face greater economic vulnerability in retirement than men. This is because women spend less time in the workforce accumulating retirement benefits and Social Security. They also live longer than men on average.So it behooves women to map out a long-term financial strategy, and begin saving sooner rather than later.

"One of the biggest mistakes women have made historically is they haven't invested early enough," says Cheryl Rose, managing director of Fifth Third Asset Management in Cincinnati.

Financial experts offer varied reasons for women's investment attitudes. "Women in general think about risk differently from men," says Jane Williams, CEO of Sand Hill Advisers in Palo Alto, Calif. "Women put a much higher premium on security and predictability and ease of management."

She offers a metaphor: "Women see money as a pond or a lake. When they dip into that pond, the level of the pond can start to be drawn down. They think of this as a finite source of security in many respects. Whereas men may think of wealth as a river running by. When you pull water out, the water will continue to flow."

Women also make decisions differently from men, Ms. Rose finds. "We like to network more. We like to ask our friends for advice. We make a more meaningful effort to research before we make purchases."

Most of her clients, she says, do not come to her and say, "I want the highest return possible." They say, "I want to sleep at night, I want to be able to send my kids to college, I want to make sure I have plenty of money to live in retirement." Some also want to contribute to charities or church.

Some financial experts challenge the notion that women are timid investors. "There's a myth about women not being as great risk-takers as men," says Susan Sweetser, a vice president of MassMutual Financial Group in Springfield, Mass. "I don't think that's true. Women don't want to take foolish risks, uncalculated risks. But once women understand the facts, they're willing to take risks."

Sometimes potential investors simply need to learn the language of Wall Street.

"It's a vocabulary that most of us didn't grow up discussing at the dining room table," says Colleen Pantalone, a professor of finance at Northeastern University in Boston. "Most of us don't talk about dividends, mortgages, bonds, and the difference between a bond and a stock."

When those subjects do become part of a family's conversation, the results can be rewarding. "When I was a young girl, my dad used to love talking to me about investing and how to spend frugally and save wisely," says Ms. Klein. "Now as a young adult, I have begun investing some of my own money in the market." The Student Investment Fund is also giving her valuable tools to apply to her own portfolio.

Other women learn on their own. Determined to be informed, Diane Hurns began reading business publications, including The Wall Street Journal and Business Week. She also talked to a friend and a co-worker, both financially savvy women. Gradually, she started investing. Over time, her money grew.

"I was able to cash in my investment earnings for my down payment on my first home in Washington," Ms. Hurns writes in an e-mail. "Now my husband leaves the investment options to me."

For others, investing remains an elusive goal. "I do budget, but I pretty much go through my whole paycheck every month," says Diane Dobry, communications director of Teachers College at Columbia University in New York. "I'm procrastinating. I'll figure it out sometime when I have a little extra money."

Although Ms. Dobry has a retirement account, she is concerned that it will not be enough, especially now that most of today's pension plans require workers to be more knowledgeable about investment options. "I don't really know the stock market. I sometimes think of it as gambling. I hesitate to put my money somewhere where I could possibly lose money," she says.

The key to overcoming fears like these is education, Professor Cunningham says. "We need to do much more in the way of educating people, both men and women, especially if we think about privatizing Social Security."

Investment clubs, increasingly popular among women, offer one way to learn. Members form a partnership, registered with the state. They pool their money and make group decisions on how to invest.

"Usually one or two people have some expertise," says Professor Pantalone. "That helps the others. Or you bring in the broker you use. It's a way of self-educating in a very nonthreatening environment."

When women join an investment club, she says, they can ask questions such as "What's the difference between interest and dividends?" without feeling inept. Calling her club "great fun," Pantalone says, "I've learned from it, and the others have clearly learned too." She notes that the National Association of Investment Clubs explains how to set up partnership agreements. It also holds forums and educational events.

Other forms of learning include adult education classes, seminars on mutual funds, and books such as "Investing for Dummies." Pantalone encourages women to take classes or join a group. "It's hard to stay motivated if you're just doing it by yourself," she says. "You really have to go someplace, and then you have to stick with it. Just sitting through one course is not enough. You have to start using it. That takes time and work."

Working with a financial adviser can help, too. "I am amazed at the number of women who do not use an adviser," says Diane Danielson, CEO of downtownwomensclub.com, a women's networking organization. "There seems to be a fear of fees. There's also the fear that they don't have enough money to invest."

She credits the advice she has received over the years for her current financial stability. Without that guidance, she would have left her money in a bank.

To reduce the ranks of what one adviser calls "mattress investors," Ms. Sweetser offers three principles of financial management.

First, invest. "There's still a risk if you're holding a dollar in your hand or putting it under the mattress. It's an inflation risk. A dollar today is buying less than a dollar did a year ago. Look at gas prices."

Second, invest on a regular basis to build a nest egg.

Third, diversify your portfolio. She buys individual stocks as well as stock and bond funds. She also buys both domestically and internationally.

As Klein and those in her group lead the vanguard of student investors at Scripps College, financial advisers see a larger challenge. "We have to help women understand at a very early age the importance of saving systematically for their retirement," says Rose. "They need to think about it today."

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