Love and Money

An investment challenge more women need to confront

Insecurity. It's not a word most women want to be associated with—at least, not in the working world.

But why is it that so many women are insecure when it comes to investing? Especially when they pay the bills, cut the college tuition checks and are the ones to shop for better deals? It's not just women, but husbands and partners who should care about the answer to this question. Why?

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More women are graduating from college. Women make up about half the workforce. Two out of every five affluent women report earning the same or more as their spouse. And yet, studies show women still lack a great deal of confidence when it comes to investing. Having wealth and strong savings values is not necessarily leading women to invest more, either. Two in five affluent women say they are "not at all" confident in their ability to invest. In fact, affluent women say having more money has actually made them thriftier.

Here are some of the questions to consider:

What kind of financial education were you given (if any)?

Stop and think: Were you taught about finances growing up? Research from Bank of America found that as many as two-thirds of women grew up in households where money was not discussed openly. Wells Fargo found that two-thirds of confident women say they were "taught about investing by someone" versus just 39 percent of those who aren't confident.

Are you buying into stereotypes at your own cost?

Traditional thinking says it's men who are better at math and analysis, but who's actually better?

Kathy Murphy, the president of Fidelity Personal Investing, recently told the story of giving a lecture at a high school. While playing financial jeopardy with a group of girls, not a single one raised her hand.

"The chief reason all women give as to why they're not investing is that they think men are better at math," Murphy said at a Financial Women's Association event.

But research also shows that while half of affluent women feel men have more confidence in their investing ability, only a quarter think men are actually more skilled in investing.

There has to be more going on.

Do you understand that taking risk is not a bad thing?

We know women are risk averse on the job front, but they're also risk averse on the investing front, despite the fact that women are living even longer lives and will likely outlive spouses, providing them with all the more need to be financially ready for retirement.

About one-third of affluent women say the stock market is "too risky" for them, according to a Wells Fargo study conducted in 2013. Even more striking is that as the wealth of these women has grown, so has their tilt toward preservation rather than growth: More than 60 percent say they have become more risk averse with their money.

Individual confidence seems to be a key factor in women's comfort with the stock market: 49 percent of women who are not confident in investing say the stock market is too risky for them versus 23 percent for women who identify themselves as confident.

Taking a lot of risk isn't always a good thing. "Men's willingness to take more risks also means a higher risk of shortfalls," wrote Brad Barber, a UC Davis professor of finance and co-author of a study on gender and investing. "Men tend to be more overconfident than women, and overconfident investors tend to think they know more than they actually do." Barber's research found that men trade 45 percent more than women. This greater frequency of making trades, coupled with the possibility of making poor decisions, reduced men's net returns by 2.65 percent vs. a 1.7 percent reduction caused by trading among women.

Steps we all can take

What can be done to help women and involve partners? Here are five ideas to get you started.

1. Read up on the right kinds of risk.

Prudential discovered in a survey that less than half (47 percent) of women are willing to take some risk for the opportunity of a greater financial reward, and a shocking 56 percent are only interested in "guaranteed" financial products.

2. Start investing at work.

If you haven't done so already, your 401(K) is an easy place to start investing while enjoying the confidence that comes from receiving those quarterly statements.

Case in point: Just by tucking aside $3,000 annually over 25 years, your account will grow to about $200,000, and could potentially reach $255,000 if your employer offers a match of 50 cents for every dollar you save (up to 6 percent).

3. Make sure both partners have a role in the financial relationship.

It's easy to hand over the financial responsibilities to your partner, but will that help women increase their knowledge and confidence?

One option is to split wealth-management duties, whether it's handling certain savings accounts or certain tasks, like shopping for a new mortgage.

4. Get clubby.

How about combining the social side of your life with financial progress? Women's participation in investment clubs has grown over the years. In fact, about half the members of investment clubs are now women, according to BetterInvesting.

And how about that trait among women on the job to be overprepared? Christine Lagarde, head of the International Monetary Fund, told the authors of the book "The Confidence Code" that she and German chancellor Angela Merkel have even talked about being overprepared. "We want to be completely on top of everything, and we want to understand it all, and we don't want to be fooled by somebody else," she said.

That trait from other parts of your life can help with financial progress.

5. Find an advisor who understands you.

If you find you're too busy, consider a financial advisor. Companies are increasingly aware that since more women are becoming the CEOs of the home, it's wise to have advisors who understand their unique needs, from investing for a longer lifespan to caring for aging parents. Studies also show women want transparency and education when it comes to their advisor relationships.

With the growth of women as advisors and their ability to nurture and educate clients, consider who would serve you best and what expertise is most important to you. Clearly, just as a mentor can help women move into good jobs or move them up the career ladder, so too can a financial mentor make a difference.

There may be a confidence gap, but taking action—by learning and doing—can help build a woman's confidence and her financial security.

Jennifer Openshaw is executive director of the Financial Women's Association (FWA) and author of "The Socially Savvy Advisor" (Wiley). Follow her @jopenshaw