Phil Town
Phil Town

I just read Kathy Kristof's column in the LA Times about how women need to be thinking about learning to manage their own money for retirement.  She writes that "Like it or not, 80% to 90% of all women will have to fend for themselves economically, often because of death or divorce." She quotes Cheryl Burbano, a financial planner with American Express Financial Advisors: "Women invest to not lose money.  Men invest to make money," she said.  "There's a big difference."

Indeed there is.

Kathy's article suggests that what she calls "Playing not to lose" is a bad idea which leads women into conservative, fixed income investments that compound money at 5%, compared to an indexed portfolio of stocks that compounds historically at 10%.

On the other hand, as Warren Buffett, who compounds money at 25%, says, "There are only two rules of investing: Rule #1 - don't lose money and Rule #2 – don't forget Rule #1."

Kathy writes that men who invest to make money play to win.  I think playing to win is a great idea if it's a football game, but maybe not such a great philosophy for, say, a doctor, a pilot or a Green Beret.  People who deal with life and death situations adopt baseline strategies that allow them the opportunity to survive a mistake.  They don't play to win.  First and foremost, they play to not lose.

Investing may not be a game you can "play to win" without taking too much risk.  For many it's a critical, life altering activity that determines how you will live someday and, therefore, must be treated more like life and death than a game.  Maybe that's why women intuitively invest not to lose.

Instead of encouraging women to follow in the footsteps of male investors who ride the ups and downs of the market hoping to compound money at 10%, why not encourage them to learn to invest like Buffett and combine low risk with high returns?  Since women seem to already embrace Rule #1, all that is missing is an education in Rule #1 investing.  Instead of investing in low risk, low return fixed CD's  backed by a business, why not invest in the low risk, high return business that backs the bond?  Why settle for 5% if, with a little education, you can have 15% and still "play to not lose"?

The difference between 5% and 15% over the next twenty years, as Kathy points out, is enormous.  $50,000 at 5% becomes $130,000.  At 15% it's $820,000. And consider this: if a woman can learn to invest with low risk and make 15% a year, look at the difference in retirement income.  In twenty years, instead of having $130,000 in 5% bonds with a monthly income of $550, she has $820,000 making 15% and is living on $10,000 a month.

Learning how to play by The Rule can change your life.  And for women who already are more concerned with not losing than with winning, learning Rule #1 investing is just a natural next step.