Streetwise for Feb 7,  2010

Streetwise

Lauren Rudd

Sunday, February 14, 2010

Valentine's Day Advice For The Fairer Sex

The advent of Valentine’s Day brings to mind once again the abysmal fact that many women have a minimal understanding of either their personal financial assets, or those of their family. Moreover, it was not until the recent market decline that either sex gave serious credence to the possibility that their blanket of financial security could be torn away.

I specifically target women every Valentine’s Day because traditionally investing has been a male dominated activity, although women are taking on a greater role. Unfortunately, the rise in the divorce rate and the increase in expected female longevity, combined with the increasing number of women who chose to remain single, means that a woman’s ability to manage her investments is more important today than it was when I first broached the subject over 15 years ago.

Every woman needs her own investment account with a deep discount brokerage firm. The use of a deep discount firm is not just a monetary issue but a barrier against relying on the so-called “advice” of others. Deep discount firms do not give advice, they just execute orders.

Experience says that I can once again expect a tirade of angry comments challenging the need for a married woman to have and manage her own portfolio. Unfortunately, a number of gruesome statistics embrace the assertion that she should. For example, women reaching the age of 65 can expect to live for an additional 25 years. That means they have a better chance of outliving their financial resources than their male counterparts. My own Mother, a widow, is 96.

Twenty percent of the female population will never marry. For those that do marry, half will divorce. Within the first year after a divorce, a woman's income usually drops by an average of 30 percent.

Failing divorce, 75 percent of all married women are eventually widowed. Among those widows, many will find they are suddenly living at or near the poverty line, despite the fact that about 80 percent were doing fine before their husbands died.

The good news is that once a woman decides to take control of her financial destiny, the sky is the limit. Over the years, I have seen many examples of women who have established their own stock portfolios, added to those portfolios regularly, and as a result will be able to live out their lives relatively free of financial worry. However, in doing so they periodically had to resist the entreaties others to change their course of action.

Yet, even the best of intentions sometimes go astray. Statistics indicate that the average woman who saves puts aside about 1.5 percent of her income. That is not enough. I recommend, and most experts agree, that everyone who earns a wage should put aside no less than 10 percent of his or her gross income each year.

Do not write to me telling me that you cannot do that, or that it “hurts” too much. I can assure you that spending your golden years working at the Golden Arches will hurt a lot more.

My own experience has shown that women like to invest in safe, insured money market accounts and certificates of deposit, or low yielding bond funds. I urge you to reconsider such a course of action. I unequivocally advocate that anyone under the age of 65 should entertain keeping a portfolio of individual equities, as opposed to instruments such mutual funds and annuities.

Assume that you are going to establish a stock portfolio and add to that portfolio, rain or shine. So which stocks should you buy? Bookstore shelves sag under the weight of mighty tomes attempting to answer that question.