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Women Invest

plant good seeds

May 6th, 2012

You are a gardener with your money. You are always planting seeds. Some come up exactly as you planned — purple flowers where you wanted them, or sunflowers exactly the right height. But often the seeds aren’t exactly what you expected. The flowers are a different color, they bush instead of climb, they don’t even germinate. Gardeners learn to be flexible, to take deep breaths in, and sometimes they celebrate the synchronicity and propinquity that come from creating in an environment that cannot be totally controlled.

Do you see the connection to money? We study, plan, hire professionals, yet still there is an element to investing and managing money that you simply can’t predict or control. So here are a few things to do so that at the end of the day you can sit back and love the garden you’ve created rather than grumble about the wrong colors, scents and design:

Plant good seeds – Buy quality investments, ones with a track record and solid management. Diversify; don’t use seeds or investments all from the same company.
Be flexible and spend a little time weeding – If something grows too fast or not at all, or is simply not what you expected, pull it out of the portfolio and try again. Investing, like gardening, is a process of trial and error. The key? If you don’t try, you’ll have no opportunity to improve your results.
Prune – Trees and bushes often grow better when cut back and thinned-out. Be willing to sell some of your favorite investment, if it becomes too large a part of your portfolio, and allow an undervalued investment to grow bigger and stronger in its place.
Expect a few failures – There are going to be investments in your garden that fail. It’s just bound to happen, and if you try to avoid this eventuality you will also miss owning the winners. Be willing to explore the edges of your risk tolerance. Don’t violate it, but also don’t let fear be your travel guide.
Be prepared – Soil happens. Rain comes and goes. Frost can bite you in the butt. With investing we can never know exactly what’s going to happen, and I can tell you with certainty that the perfect investment last year won’t be stellar in the coming years. The market, just like the growing year, is cyclical. But unlike the seasons, we can’t always predict that a sudden snowstorm is going to lock us inside our house with eight crazy relatives, four dogs and an ailing guinea pig. You can come prepared with your attitude (flexibility really is the key to happiness), and with your back-up plan (insurance is handy when the rock falls on your foot or the tendonitis in your shoulder from weeding prevents you from working until Spring). Create a financial plan that has the unexpected built into it.

To get to know Luna better, read her story or visit her website.

Categories Women Invest
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what do you believe about money?

by Eleanor Blayney

January 31st, 2012

Understanding our beliefs about money is important because these in turn direct our behavior with money, which is perhaps the most significant factor in determining whether or not we become financially successful. We need to be aware that decisions about money often are not rational choices, but rather emotional responses born of early experience. To be financially successful, we have to make fewer irrational and impulsive decisions derived from emotional responses, and more rational and deliberate choices.

Both rational and irrational decisions can be subdivided into long-term and short-term ones. Possible financial choices can, therefore, be represented by the following Money Action Graph:

You have likely done this in your mind if you’ve ever bought a lottery ticket. Imagine a sum about five or six times your annual income (or what you think your annual income should be) and assume that I just handed you a tax-free check for that amount. Take no more than three minutes—first thoughts are important—to write down, in order of priority, six things you would do with the money. Try to set aside any ideas about what you should do. What do you want to do?

Your answers likely ranged from the sensible to the frivolous, from fulfilling long-term objectives to indulgent whims. Consider the very first thing on your list. Does this tell you something important about what you believe money is for?

There are generally four ways in which we use money:

Spending
Purchasing
Hoarding
Investing

Relating these uses to the Money Action Graph above, our new graph would look like this:

Let’s consider each of these activities and the kinds of beliefs that underlie them.

Spending. This word is often used in the context of buying everyday, inexpensive items without much forethought. Since women are often responsible for fulfilling the daily needs of a household, most of us engage in this activity when buying food or other necessities. However, we also spend as a form of recreation or entertainment. Have an afternoon free? Let’s go shopping! And off we go buying products and brands we did not even know we wanted until we were told we did by a multibillion-dollar marketing industry.

Purchasing. The activity of purchasing may seem similar to spending, but the formality of the word alerts us to a difference. We usually talk about purchasing when buying big or important things: homes, cars, or life insurance policies. I have never talked about purchasing a bag of Doritos. There is a deliberateness—an underlying rational process—that motivates purchasing.

Hoarding. Hoarding involves keeping something of perceived value for a very long time. It stands in contrast to spending in the sense that it involves holding onto something as opposed to letting it go. When we think of famous hoarders, George Eliot’s Silas Marner comes to mind. He was a greedy man fascinated with gold, a tangible form of wealth that seems even more concrete, solid, and safe than money.

Investing. Investing is a long-term use for money and requires careful, rational consideration. No doubt some investments are made impulsively, but arguably the investor in that case is more of a purchaser or even a spender, buying an attractive idea without careful review of what she is getting.

Using some real-life examples of what women do with their money, the more detailed Money Actions Graph might look like this:

This “Money Beliefs” exercise was excerpted from Eleanor Blayney’s book,
Women’s Worth – Finding Your Financial Confidence.

which is bigger: the global stock market or global bond market?

by Margie Carpenter, CFP®, CIMA®

November 18th, 2011

Directions is proud to present an investment commentary by a smart woman advisor who focuses on women clients.

Margie Carpenter

Investment professionals often talk more about stocks and the stock market than bonds and the bond market. “The stock market is so volatile!” “Buy low, sell high!” “Is this a good buying opportunity?”, and my personal favorite (cough), “What is the next hot stock?” By the way we talk, you might think the stock market is not only more influential, but also much bigger in size than the bond market. This is simply not true.

By recent estimates, the worldwide bond market’s total value is about $82 trillion, while the worldwide stock market’s value is approximately $45 – $50 trillion, which is a little more than half the size of the bond market. Does this surprise you? It surprises a lot of investors, but there are good reasons for this size difference.

The bond market has many issuers, including governments, agencies, states and municipalities (taxable and tax-exempt), mortgage-related and asset-backed bonds, and corporations. Not all of these entities are in business to earn profits. The bond market is a massive, decentralized network of buyers and sellers. It is easier to issue new bonds than stocks; bond issuers simply establish the terms and bring the bond(s) to market. There are no stringent listing requirements or hurdles, such as there are with stocks. When you purchase a bond, you are lending your money to the bond issuer in exchange for a regular interest payment, and you expect the return of your loan amount when the bond matures. Bond market movements are influenced mostly by changes in interest rates, so is more of a current assessment of how our economy is doing now. There is more demand for bonds than stocks around the world, since bonds are generally less risky than stocks and provide a more stable return.

The stock market, on the other hand, is made up exclusively of public (as in “publicly-traded”) corporations, and stocks are traded in a centralized marketplace consisting of only a few exchanges. To issue new stock, companies must provide detailed financial information including their net worth so that new shares of stock can be appropriately priced. When you purchase a stock, you are buying and therefore own a part (albeit small) of the company and there is no specific maturity date on your investment. As an owner of the company, you can vote on important shareholder issues, and you can own those shares as long as you like. A company’s profitability is extremely influential on its stock price. Stock market movements are more of an indicator of where the economy might be headed, and is typically focused on predicting future earnings of companies. Consumer sentiment plays a huge role in how the stock market performs. Movements in the stock market tend to be more volatile, due to its perceived and actual risks being greater than those in the bond market, and therefore the expected returns for stocks are greater.

There are always exceptions to these general rules of thumb. Bonds do sometimes outperform stocks, (depends on type of bond, time period used, etc.) but generally, stocks are expected to outperform over longer periods of time.

So which market, stocks or bonds, is more influential around the world? It depends on your perspective of course, and how much you might own in each, but in terms of sheer value and size, the bond market is the clear winner.

To learn more about Margie Carpenter, visit her website, Bell Tower Advisors.

Categories Women Invest
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Circles Can Change the Conversation

by Eleanor Blayney

July 11th, 2010

We need to change the way we talk about finances with women. This is not a slight against our gender. I’m certainly not suggesting we lack the intelligence to comprehend personal finance. But women perceive and learn differently from men. In particular, research has shown that men prefer to learn independently, while women learn well in supportive, collaborative environments. Men are apt to charge ahead and learn while doing, whereas women prefer to stand back, listen, and observe. They want to read the manual, so to speak, before turning on the computer or launching the program.

The field of sociolinguistics, and more particularly, the work of Deborah Tannen, professor of linguistics at Georgetown University, shows that men are much more comfortable speaking in terms of “one-up” or “one-down.” They have an inherent need for competition and hierarchy in order to understand where they fit in the world. Women, on the other hand, are much more collaborative: they seek common experience and want to put themselves on the same emotional and intellectual plane as others.

The male need for hierarchy, for locating themselves in the pecking order, may explain why the language of personal finance—and most particularly that of investing, long dominated by men—is invariably put in terms of winning and losing. It may explain, too, why my male clients are more apt to evaluate investment performance in terms of benchmarks. They want to know if they have done better or worse than a given standard, such as the S&P 500 or the Dow, whereas female clients, when presented with investment results, are more apt to ask: “But what does this mean?” And they are not asking for that meaning to be measured in basis points.

Women are more contextual and less absolute than men. In my experience, they want the context for advice and find it easier when I preface my counsel, as I invariably do, with the phrase: “It depends.” It depends on your risk tolerance; it depends on your family situation; it depends on where you want to live.

My male clients are less patient with context and usually want more definitive, shorter answers. They want the bottom line. Men are the ones who, when asked by their wives or girlfriends if they look good in a certain dress, will simply answer “Sure” or “Nope.” Women know, of course, that the better answer begins with another question, such as: “What do you have to go with it?” or “Where do you plan to wear it?”

How can women’s preferences for commonality, context, and consensus be brought to bear on financial advice? The answer, I strongly believe, lies in circles, the process of women coming together with a common purpose. Throughout history, women have been attracted by the productive potential of circles. In colonial times, women gathered for sewing circles or quilting bees to assist in setting up the household of a couple about to be married or to have a child. Yesterday’s sewing circles and bees have evolved into today’s book clubs, recipe swaps, scrapbooking clubs, giving circles, and investment groups. The popularity of these groups among women is unquestioned and growing.

Learning about money in a community of women makes the work seem easier and even enjoyable. A circle setting where women come together to discuss the financial issues unique to them, such as living alone or coping with the negative financial consequences of divorce, is immensely empowering. It is also a safe place to discover one’s financial identity and to find answers to what women may fear are dumb questions. Through sharing and relating, women gain autonomy and knowledge to bridge the gap between their capacity and confidence.

Excerpted from Eleanor Blayney’s book Women’s Worth.

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