Streetwise

Lauren Rudd

Sunday, February 12, 2012

A Better Valentines Day Gift

Valentine’s Day is almost upon us, which means that it is time to repeat some of my most often asked for words of advice. Although jewelry, flowers and chocolate will be on the minds of most women next week, they should probably be thinking about investments instead. It is an abysmal fact that many women have a minimal understanding of either their own personal financial assets, or those of their family.

And while the ability to manage financial assets profitably should be a key trait for every woman, it is understandable if the idea is not at the forefront of your thinking. After all, it was not until the Great Recession that either sex gave serious credence to the possibility that their blanket of financial security could be torn away.

Traditionally investing has been a male dominated activity. However, the rise in the divorce rate, the increase in expected female longevity, and 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 17 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 is 98 and has been a widow for the past nine years.

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 falls 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 a woman can take control of her financial destiny. 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 often had to resist the entreaties of 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 certificates of deposit or low yielding bond funds. I urge you to reconsider such a course of action. I unequivocally advocate that everyone should entertain keeping a portfolio of individual equities.

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

Out of the nearly 10,000 public companies, you want to invest in 10 to 15 blue chip dividend paying industry leaders with a 10 year history of rising profits and dividends and whose products you understand. For ideas, you need only check out the Dividend Achievers Handbook, published by Mergent (800-342-5647). That way you can slip your loved one a note with a few stock symbols and a reminder that chocolate will only contribute to your waistline, whereas stocks will contribute to your wealth.