On average, women need to cover longer lives than men and have less money to do it.

Female investors tend to hold lower-risk assets and fewer equities, even though they are likely to live longer than male investors.

And, so, a case could be made that women should consider having more exposure to equities and taking on more risk, perhaps even relative to men, according to recent research done by Delaware Investments.

“Women on average hold 20% less equities than men, and this is a problem because if you’re going to live longer you should probably actually be taking on more risk not less risk,” said Sharon Hill, senior vice president and head of equity quantitative research and analytics at Delaware Investments, in an interview with ThinkAdvisor.

Women are living on average 5 years longer than men, according to the U.S. Census Bureau’s most recent statistics, which means more years in retirement. And more years in retirement means increased retirement needs generally, along with higher health care costs.

In addition to living longer, women also have more ground to make up in terms of retirement assets because women on average spend more time out of the work force acting as caregivers and earn less (81% as much as a full-time male worker, according to Bureau of Labor Statistics as of January 2012).

And yet, Hill, who conducted the research, found that women’s investing style may not be getting them the results they need.  

“The literature has been showing this, ever since like the ‘80s, that women are more risk-averse than men,” Hill told ThinkAdvisor.

Compared to men’s holdings, Hill found that women have a more conservative approach to investing, and, more specifically, women’s investment portfolios contain a lower proportion of risky assets.

In her research, Hill looked at a National Association of Securities Dealers study that illustrated the differences in portfolio holdings between men and women.

According to the NASD study, women held nearly twice as much in so-called “risk-free” and lower-risk assets (such as cash and money market accounts) than men. The study found that men held almost 20% more high-risk assets than women.

The NASD study, “Gender differences in investor behavior,” published on Aug. 31, 2006, was based on telephone interviews between October 2005 and February 2006 with 591 male and 320 female respondents with household incomes above $75,000.

It’s no secret that risk and reward are closely linked in investing.

Hill notes in her research, “The greater the potential for an investment to gain substantially in value over the long term, the greater the risk it might drop substantially as well. If you want to reap the financial rewards of investing successfully, you have to be willing to take some risk. In this case, if women invest too conservatively, it’s possible that, on the whole, they may fall short of their financial goals.”

Hill had some suggestions on what women — and their financial advisors — can do.

“I think women, if they are uncomfortable going out and buying equities, that they can sort of outsource some of it by putting themselves into target risk funds,” she told ThinkAdvisor.

The best thing an advisor can do, Hill said, is educate their female clients about the market.

“Women are much more likely to do something when they feel more confident and when they know more,” she said. Adding, “Gone are the days of ‘Don’t worry your pretty little head about it. I’ll take care of it.’ And hello are the days of ‘Sit down with me and I’m going to show you what we’re doing.’”

She also said it’s important for advisors to look at their client portfolios for gender biases.

“Financial advisors should look at their portfolios statistically — basically, look at how they’re advising their women, how they’re advising their men — and see,” she told ThinkAdvisor. Adding, “Advisors should be aware of this, first of all. And look at themselves and make sure they’re not imparting some sort of unnecessary bias — and I don’t mean bias in a bad way but make sure they’re not creating a conservative position where there doesn’t need to be one.”

Hill also suggests that women should monitor their own portfolios.

“I look at my own portfolio and I say ‘Why am I holding so much cash-like investing?’” she told ThinkAdvisor. “And once I factor in my cash flow, I feel like, ‘Oh, I’m doing it for a reason. I’m not doing it because I’m a big ol’ wimp.’ But I question that, and people really need to question their own biases knowing that bias is just the first step in checking yourself.”

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