Friday, July 1, 2011

Another Book-length Investment Study on Women

I'm sure Warren Buffet doesn't mind the title of LouAnn Lofton's new book "Warren Buffet Invests like a Girl". But does he really or is he just showing a sensitive side?

Here is an interview the author had recently with Reuters. And below that, I'll examine some of things Mr. Buffet has said and wonder if they could have been said by a woman. Two things you must know if you don't already: I think women make excellent investors and two, I haven't read Ms. Lofton's book.

Like all quotes, they can and will be taken out of context. And the standalone quotes are just that, standalone, without the surrounding text to bring them to life. Nonetheless, do these next five quotes attributed to Mr. Buffet as Ms Lofton suggests, reveal something about the man investing like a woman, or perhaps as she should?

"A public-opinion poll is no substitute for thought." Study after study has suggested that women value the opinions of others whereas men seldom do. Not to say men don't look to the successful or experienced for information to help them invest, but given the choice, men will continually say they arrived at a decision on their own, after much thought and consideration. In fact, men look at investing as the result of much "thought" even as they gained lots of opinions along the way.

A woman's ability to network, seek advice, even consult a mentor is at the heart of the every effort to get women to invest more. They value public opinion and make decisions based on what those opinions offer. Could Mr. Buffet simply be suggesting the circle of wise friends, a class of like-minded individuals or simply the educational sources women seek akin to putting too little thought into the process? Score One for Warren investing like a man.

"I always knew I was going to be rich. I don’t think I ever doubted it for a minute." Single-mindedness, bullheadedness, even the slight hint of braggadocio are more than evident in this statement. There are women who have all of these traits and are driving the statistics that suggest women are on the upswing as investors. But the problem remains and was pointed out recently by Sheryl Sandberg, COO of Facebook when she offered this piece of advice to the graduates of Barnard College.

She suggested that women make small decisions along the way that eventually lead them” to a bigger decision, one that leads them to want more balance. Her message to this class of 2011 was “do not leave before you leave. Do not lean back; lean in. Put your foot on the gas pedal and keep it there until the day you have to make a decision, and then make a decision. That’s the only way,” she said, “you’ll even have a decision to make.” As long as women approach the world in this manner, the gap between who women investors are and what their male counterparts have become will persist. Score One for Warren investing like a man.

"I buy expensive suits. They just look cheap on me." Suits, like armor are all in the wearer's ability to pull the look off. Investing is like that as well. It's illusory and easily-lied about trait make it best suited, no pun intended, for men.

Women on the other hand like the research but not the sort of information that is clustered around numbers and charts. Instead, they want to invest and look good when they do. This keeps them from taking any investing (fashion) chance and as numerous studies have shown, means women take far fewer risks. Investments are needed and retirement is a must. But it will never be fashionable because no matter how hard a woman tries, the act feels cheap. Women need to get over that and too not over-think the process. There are some excellent ways to get to what needs to be done when it comes to investing and retirement planning and much of it comes from learning how to budget and creating a debt-less lifestyle. Score One for Warren investing like a man.

"I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over." Women have been stepping over 1-foot bars for quite sometime. And this slow and easy approach to investing is definitely a plus for their chances to be successful when they invest. But the investor we think about, the ones I have spoken to have all pointed to a single investor philosophy: sell before you get hurt.

While I am going to score this one for women, because I do advocate the slow and methodical approach to gaining wealth, there is still too little money being directed at these 1-foot step-overs. But that is a topic hinged on pay and until women reach income parity, they will not feel as well-invested as men. Score One for the women.

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well." and "Our favorite holding period is forever". This emotional behavior, the herd mentality mentioned in the first quote and the patience to keep with something that has long gone out-of-fashion don't seem to be reflective of the women I have met. Granted, I usually tap the sources closest to me, professional women in my network and the research done academically to form some sort of a conclusion, albeit a moving one,. But I wouldn't be far off the mark to see women (and men) chasing the chance to follow the rest of the herd if the herd seems convinced. Remember, it takes one to turn the tide in a direction and in most cases, the rest will follow. What appears to be a sale or the in the case of men, the next new thing, is in fact a display of our susceptibility to what the crowd suggests we need.

Keep in mind, I'm extrapolating here when I use the activities of everyday life to suggest that this is how we invest. But taking the emotional animal out of the equation is difficult to do and behavioral economist know this as well. As to buy and hold and Ms Lofton's suggestion that his investment style is "girlish", I offer one word: redecorate. Score Tie

I do applaud Ms. Lofton's effort at addressing this topic. Women have a great deal of ground to cover and while doing so, men could benefit from what they are learning. Better 401(k) plans with index funds, higher IRA contribution limits and requiring annuities in every 401(k) would have a leveling effect for both sexes, but much more so for women.  It's just too bad, at this point so far along in the history of these markets, that the icon a woman wants you to look at is a man.

Paul Petillo is the managing editor and founder of and a fellow Boomer.

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