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Women top men as investors, survey says

By HELEN HUNTLEY
Published April 24, 2005


Are women better investors than men?

That's what Merrill Lynch claims to have found in a recently released survey. Women made fewer investment mistakes and were less likely to repeat them - or at least to admit to survey takers that they repeated them.

Merrill said its results showed 35 percent of women said they had held a losing investment too long, while among men it was 47 percent. The worst part: Of those who did it once, 48 percent of the women and 61 percent of the men admitted to doing it again.

Similar gender differences turned up on other issues: 13 percent of women and 24 percent of men said they had bought a hot investment without doing any research. The men were more likely to repeat that mistake.

"Everyone makes mistakes," said Hannah Grove, chief marketing officer of Merrill Lynch Investment Managers. "Successful investors learn from theirs."

The numbers come from a telephone survey of 1,000 people with household incomes of at least $75,000 and investable assets of at least $75,000. They jibe with what other surveys and studies have found.

Terrance Odean, a University of California at Davis professor who also has studied the issue, found women earn slightly better returns because they trade less frequently. Men, he says, are overconfident.

That showed up in the Merrill Lynch survey, too. Women were more likely to say they are not knowledgeable about investing and more likely to rely on a financial adviser.

Other studies show men are more willing to take risks and invest more aggressively than women.

What can we draw from all this? Whether you're a man or a woman, it pays to acknowledge your limitations and to try to understand the emotions that may be driving your decisions. Research investments before taking the plunge - and maybe even seek out some knowledgeable advice.

And learn from those mistakes. After all, you're paying some pricey tuition for the education.

Freddie Mac has cut the dividend on a preferred stock I own from $3 per share to $1.76. A dividend of $3 was fixed at the time it was issued and has been paid for five years. The cut not only reduced income, it devalued the stock. I have owned preferred stock in numerous companies for many years and have never experienced a reduction. I am amazed that Freddie Mac would renege on their promise to pay a fixed dividend and raise the possibility that other preferred stock they have issued may also be in line for a cut. I have contacted Freddie Mac requesting an explanation, and they have not responded. Can you offer any information or suggestions?

I don't know why Freddie Mac didn't respond, but it never promised to pay a fixed dividend on this stock. Preferred stocks come in fixed-rate and variable-rate varieties. The one you bought pays a variable rate that adjusts every five years based on the rate on the five-year Treasury security. It will adjust again in December 2006.

Your broker should have explained this, and the confirmation slip should have included "variable rate" in the description.

If you own other variable-rate preferreds, there is the very real possibility that they will adjust their rates too. You need to find out when that can happen so you are not surprised. A good broker should supply you with this information. If you invest on your own, a good online source of information on preferreds is www.quantumonline.com - click on "income lists."

What is a stock's payout ratio?

It's the annual dividend per share divided by the earnings per share. If the dividend is 40 cents a year and the earnings are $1, the payout ratio is 40 percent. A low payout ratio means the company has room to increase its dividend. A high payout ratio means it does not. A company that pays more in dividends than it earns is a candidate for a dividend cut.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to huntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified September 2, 2005, 16:03:40]


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