Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Janet Bodnar, the Deputy Editor of Kiplinger's Personal Finance magazine to talk about men, women and investing. Janet, mutual fund, stocks, bonds, they all work the same, why is it different the way men and women invest?
Janet Bodnar: Because Kevin, men and women face different financial situations in their lives and this leads to different attitudes towards those very same, very similar products.
Kevin McCormally: Oh! What are the different financial situations?
Janet Bodnar: Well, so women, for example, women tend to live longer but at the same time they move in and out of the workforce more frequently, so they build up less seniority, less in the way of retirement assets, which is one thing. Sometimes, if they are married, they drop out of the workforce to raise children and they find themselves dependent on another person's income and they worry a lot about divorce and widowhood frankly.
Kevin McCormally: How does this affect the way they invest their money?
Janet Bodnar: Well, they are very concerned about preserving their asset. So this makes them very conservative in the way they invest, sometimes too conservative, and they also express less confidence in their ability to invest compared with men.
Kevin McCormally: So men are more confident or maybe gung-ho.
Janet Bodnar: That's right, they say they are. They are willing to take more risk. They also feel that they can make back their losses, I think that's a big thing. So they don't worry. They are not as worried about preserving their money, because they feel that if they lose money they can make it back. But there is a downside for men too.
Kevin McCormally: What's that?
Janet Bodnar: The downside is, they tend to be sometimes overconfident, too confident, and what happens is, they trade too frequently. What happens when you trade, obviously you are incurring commissions, which reduces your return. An interesting study that was done in the 1990 shows that women actually earn more, women investors actually have a higher return on their accounts because they trade less frequently and incur fewer commissions.
Kevin McCormally: So how can men and women, husbands and wives, work together and make this work better for them?
Janet Bodnar: Well, I think they need to both contribute to the investing decisions in the household, because they can complement each other's strengths and make up for each other's weaknesses. When I talk to women I always say, you can pull him out of silver futures and he can pull you out of CDs, and together the two of you can mass the money that you need to have a secured future together.
Kevin McCormally: Great idea Janet! Thank you very much!
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