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Sunday, February 10, 2002

By Lauren Rudd

A statement in last week's column that said, "If you had dug deep enough into Enron's background and financials, it is likely that you too would have learned of the warning flags," brought several letters of wailing protest, including a letter from a business editor of one of the papers I write for.

I promise to delve further into the subject of how you can avoid the potholes of Wall Street next week. However, Valentine's Day is only a heartbeat away and there have been numerous requests that I once again dedicate a column to providing some advice and encouragement on how women can best tackle Wall Street. For the men reading this, what follows might encourage you to help that special lady in your life become more proficient in dealing with the suspender crowd.

It is important that every woman establish her own investment program. Not only will you benefit monetarily but you will also gain the expertise and experience necessary to becoming financially self-sufficient. Women who reach the age of 65 can expect to live for another 25 years. Therefore, you stand a much better chance of outliving both your mate and your financial resources.

Furthermore, 20 percent of the female population will never marry. For those who do marry, half will divorce. Within the first year after a divorce a woman's income usually drops by an average of 30 percent.

Failing divorce, 75 percent of all married women are eventually widowed. Of those widows who find they are suddenly living at or near the poverty line, 80 percent were doing fine before their husbands died.

The good news is that once a woman decides to take control of her financial destiny, the sky is the limit. I have talked with many women who established their own portfolios early on, added to those portfolios rain or shine regardless of marital status and are now approaching retirement age free of financial worries.

There were no exceptional circumstances at work here. Very few of the women I talked with reached "executive compensation levels." Many held administrative or clerical positions or worked in careers such as real estate that often result in minimal retirement or pension benefits.

None of that stopped these women. They became financially independent because they regularly added to their portfolios and maintained a long-term investment horizon. Just as important was their ability to resist the entreaties of others to change their course of action.

Statistics show that the average woman who saves puts aside about 1.5 percent of her income. That is not enough. I recommend, and most experts agree, that you need to put aside no less than 10 percent of your gross income each year. Discipline yourself to invest some money each month, a technique known as dollar-cost averaging.

Women have a tendency to invest in safe, insured savings accounts and certificates of deposit. I urge you to reconsider such a course of action. As this column has pointed out repeatedly, during every 20-year period since 1931 stocks have outperformed all other forms of investment. I believe that anyone under the age of 55 should entertain keeping no less than 75 percent of his or her portfolio in equities.

Let us agree that you are going to set up a stock portfolio if you do not already have one and that you will add to that portfolio on a regular basis. In doing so, you want to utilize a deep-discount brokerage firm. There is no reason to pay more than $15 per transaction to purchase any stock.

So which stocks should you buy? Bookstore shelves sag under the weight of mighty tomes attempting to answer that question. So let us slice through the Gordian knot and simplify the answer. Out of the nearly 8,000 public companies, you want to invest in no fewer than 10 and no more than 20 of the bluest of the blue chip industry leaders.

Companies with a history of producing increased profits year after year such as Intel, Pfizer, Harley-Davidson, BB&T, General Dynamics, Wal-Mart, Home Depot and General Electric.

Ladies, if someone asks you what you want for Valentine's Day, forget the chocolate. Instead, jot down a few stock symbols, hand it to him and say these have fewer calories.

Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com or 6 Keelson Lane, Savannah, GA 31411.