What women can do to achieve their investment goals

Volatile markets and bailout headlines continue to unsettle even the most savvy investors. In today's transformational market environment, many may wonder what actions they should take to protect their finances.

Women are particularly hesitant in today's markets, fearing that they will make the wrong decisions.

According to a study released by Prudential Financial in May, many women have set financial goals but lack understanding of basic financial products and services. This creates what Prudential calls a "confidence gap."

"Women often put their personal finances on the back burner," says Judy Rice, president of Prudential Investments. "My advice is to pay close attention in a challenging financial market and become educated as to risk. Invest with a longer-term perspective, seek the advice of a financial adviser, and don't panic."

Growing market uncertainty is occurring at the same time women are taking on increasing roles as providers for their families. Women contributed 35 percent of family income in 2005, and one out of four women earned more than their husbands, according to the Bureau of Labor Statistics. From 2000 to 2007, the earnings of women earnings grew 25 percent versus 19 percent for men.

As women become a greater economic force, specialized financial services are expanding to serve their particular needs. Insurance companies, investment and commercial banks, and financial planners are eager to educate women to market opportunities and risks.

Among the first steps women – like all investors – should take in developing a financial plan is to determine their tolerance for risk. This step requires factoring in their age, employment, savings, family responsibilities, retirement goals, and expected longevity.

A "risk-averse" woman would opt for less volatile investments and more certain returns, achievable through Treasury securities, bonds, CDs, and, until recently, money-market funds. Women comfortable in holding higher-risk assets would be more heavily invested in the equity market.

Another factor to consider is liquidity. This is simply the ability to free up one's investments for any emergency. An investor requiring liquidity would hold shorter-term investments with lower returns that are not penalized if sold early, such as short-term Treasury bills and cash.

Womens' investments are also intrinscally linked to their age. Many women in their 20s and 30s are just beginning careers, focusing on becoming financially independent, buying a home, and eventually starting a family. Women in this group can afford to be higher risk investors, as they have fewer financial responsibilities and have extended time to regain any investment losses.

As women move into their 40s and 50s, many become focused on managing family responsibilities, such as financing college costs and caring for elderly parents. They also look to advance their careers to maximize income. In this stage, women need to maximize their investment returns as well to achieve retirement goals and should seek to diversify their assets – another strategy that's applicable to investors across the board. Women may also find it helpful to establish separate investment accounts for their children's college educations and for the care of their parents. Such accounts should be lower risk.

In their 60s, women may struggle with identifying second careers or transitioning to a comfortable retirement. Depending on the security of their retirement finances, they are likely to reduce their allocation to equities and should revalue their investments to determine any retirement shortfalls.

As important as investment return is the issue of overall risk management. Women at all stages of life should not neglect insurance, given their traditional role as primary family-care providers. Healthcare, disability, and long-term care insurance are vital in any sound financial planning discussion.

Here are some tips for achieving financial security, even in today's challenging environment:

•Educate yourself to the rapidly changing financial marketplace. Recognize that your current banking and insurance relationships will change – perhaps dramatically – given the potential restructuring and "bailout" legislation.

•Determine your risk tolerance. If you cannot sustain market losses, reposition your portfolio now.

•Conserve your credit. The credit crunch is real in today's market and credit standards are increasingly onerous. Utilize your credit carefully and allocate to the most important priorities.

• Dr. Kathleen Connell's website, lifecalculator.net, now focuses on financial strategies for women, presenting case studies of those who have overcome financial setbacks. It also features stock and mortgage data and links to financial resources for women.