The financial services industry sometimes gives women a bad rap when it comes to their investment attitudes and behaviors. They are often seen as risk avoidant and even indecisive in their approach to investing. In the end, however, these qualities may significantly benefit both female investors and the financial planners who advise them.

STUDY SAYS

Industry and academic research consistently demonstrate that women, in general, are more cautious and less confident investors than men. A recent study by Redbook magazine found that males were three times more likely to take an investment risk than females.

Another survey, conducted by Harris Interactive for Charles Schwab, revealed that nearly half of all females polled agreed with the statement: "investing is scary for me," while just one out of four male respondents shared the same sentiment. The Harris poll also found that over 80% of male respondents felt confident in their investing abilities versus just over half of females.

Ironically, a woman's insecurities can translate to potent advantages when making investment decisions. It seems that a little "investophobia" is not at all bad. According to research conducted by the University of California, while men tend to be the more confident investors, they trade 45% more frequently than women do. The report goes on to suggest that by trading more often, and without enough research, men may increase their transaction and capital gains costs, along with reducing overall returns.

Proof in the pudding? The study found that portfolios managed by men in the same survey significantly underperformed investment returns generated by women-by 140 basis points. Echoing these results, international research company Digital Look found that after analyzing over 100,000 portfolios in 2001 and 2005, investment returns for women were significantly higher than those for men in both periods.

Academics speculate that one underlying reason for a woman's investing apprehension is rooted in historically male-biased stereotypes associated with math and finance. These stereotypes date all the way back to the earliest elementary school grades. For example, the landmark Gender Investment Comparison study determined that boys are generally more encouraged to earn and save earlier, as well as excel in math, than girls are.

In addition, while our nation's education system provides little instruction to children of either gender about basic financial concepts, it may leave women in particular, more ill-prepared. Perhaps it's not surprising then, that three out of four females in a recent study by Oppenheimer Funds said they wished they had learned more about investing growing up.

KNOWLEDGE GAPS

Largely because of inadequate financial education, many women have serious and troubling deficiencies in their investment knowledge when compared with men. According to Merrill Lynch Research, women were less likely than men to correctly identify historical inflation rates (43% versus 67%). The study also found that far fewer females (39%) than males (65%) were familiar with the strategy of dollar cost averaging.

One of the most surprising investment literacy gaps for women relates to the concept of diversification-widely viewed as one of the most fundamental risk management techniques. According to the Michigan Retirement Research Center, in 2005, less than half of female respondents (47%) said they knew about diversifying risks.

Not surprisingly, shortfalls in investing savvy among women carry over to investment products as well. To illustrate, a recent study by Oppenheimer Funds revealed that 62% of women do not have a good grasp of how a mutual fund works. On a similar note, research by Prudential Financial found that some four in 10 women said they did not understand individuals stocks and bonds well.

The good news for women is that education is both a game changer and equalizer. Research by Ronald and Elizabeth Goldsmith from Florida State University suggests that financial education not only increases investment wherewithal among both genders, but also closes the knowledge gap between them.

MUTUAL BENEFITS

At least partially as a result of their investment insecurities, women tend to be more predisposed to seeking out advice and planning than men are. According to the Investment Company Institute and Securities Industry Association, two out of three female decision makers surveyed said they "always" or "sometimes" seek the counsel of financial planners in making investment decisions versus just over half for men. The same study also revealed that 51% of sole decision-making women said they buy stocks through a financial professional, compared with 37% of men.

Better still, the more assets a woman owns, the more likely she is to turn to investment professionals for help. Industry experts Russ Prince and Hannah Grove found that four in five wealthy women with investable assets over $3 million turned to financial planners for investment advice.