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By James M. Clash ,  12.11.00

Everywhere you look, someone is telling women how to invest. Business Week earlier this year created "Hers," a column for women investors. Money magazine published an issue this spring devoted to the female half of the population. We've played this game, too: FORBES, in a 1998 story, implied that women should choose their brokers the way they choose their gynecologists.

Book publishers are cranking out truckloads of women's investment titles, like Money Makeovers and Girls Just Want to Have Funds: How to Spruce up Your Money Life and Invest Like a Pro. Women's Financial Network is among those offering targeted advice over the Internet. There's even an index called Equity, founded in April, that consists of 25 companies picked for no other reason than that they are headed by women (examples: Margaret Whitman's Ebay, Candace Carpenter's Ivillage and Andrea Jung's Avon). Now Charles Schwab, the discount brokerage, is rolling out a mammoth program called Women Investing Now.

Gender-based marketing. It makes sense for deodorants. Does it make sense for money management? Perhaps, if the financial advice were rock-solid, but unfortunately much of it isn't. Until Siebert Financial bought it this fall, Women's Financial Network carried a "financial horoscopes" page. The Schwab Women Investing Now information packet is chock-full of fluffy articles about women's investment clubs, socially responsible investing, women "money mentors" and how to pick a financial planner.

Carrie Schwab Pomerantz, the daughter of Schwab's founder, Charles, defends Schwab's new program. She cites a recent poll conducted by Harris Interactive that found that 48% of women (double the number of men) think that investing is "scary" and that only 53% of women have confidence in their investing ability (versus 82% of men). But other studies show that women do fine on their own.

 In 1998 the University of California at Davis examined trading records of 35,000 customers (male and female) at a large discount brokerage and found that, on a risk-adjusted basis, women earned an annual 1.4 percentage points more than men. The reasons: Men tend to invest in riskier, smaller companies and churn their portfolios more—on average, 45% more. Another study, conducted by Watson Wyatt Worldwide, examined the records of 156,000 employees eligible for 401(k) plans. It found that women invest a larger percentage of their income and are more likely than men to participate (at the $75,000 annual earnings level, 87% enrolled versus 75% for men).

 One person offended by the pandering to women is the Wall Street veteran Joan Lappin, who 14 years ago founded Gramercy Capital Management, a private money manager. "I don't think it makes a difference if you are a kangaroo, a man, a woman or a child," says Lappin, shaking her head. "If you are bothering to invest, your goal is to make money."

 Is the marketing hype driving women to misinvest? It could be. The popularity of women's investing clubs—first made famous by the Beardstown Ladies, then infamous when their ten-year annual return claim was reduced from 23% to 9% because of accounting errors—is at an alltime high. Two thirds of the membership in the 36,500 registered clubs is now women. Will any of these groups consistently out-trade the market? As for socially responsible investing—don't get us started. Performance measures make clear: If you want to further a cause, donate your profits. That Equity women's index? So far this year it lags the major indexes.

 Most disturbing is the fact that, according to Schwab, 57% of women think that they need a professional money manager, compared with 38% of men. It's one thing to blow $11.65 on Amazon.com for Barbara Stanny's Prince Charming Isn't Coming: How Women Get Smart About Money, but it's another to squander an ongoing 1% of your assets on a planner when a simple allocation of index funds geared to one's life cycle would do. (If anything, because women live an average six years longer than men, they must be more frugal with fees.) A $100,000 investment, compounded at an annual 8% for 25 years, is worth $152,000 less with that 1% raked off the top.