More women get into the market

If you know a woman who isn’t yet investing, clip out this article and pass it on to her. She may thank you one day from the bottom of her wallet.

Consider these facts. Wives tend to be less involved than husbands in household investing and retirement planning. Most married women outlive their husbands — often by 15 to 20 years. The vast majority of widows in poverty became poor only after the death of their husbands. And older women are nearly twice as likely to live in poverty as older men.

But wait — put down that hankie. There’s good news, too. More women are investing today than in the past. According to a survey by Money magazine and OppenheimerFunds, 63 percent of women participated in buying and selling stocks, bonds and mutual funds for their families in 2002, up from 53 percent in 1992.

When women invest, they can do very well. In 1998, Brad Barber and Terrance Odean, professors at the University of California at Davis business school, found that men are more likely than women to be overconfident and to trade frequently, and that their investment performance can suffer as a result. Single men, for example, traded 67 percent more than single women, reaping lower returns.

Here are some guidelines for women — and men — interested in getting started investing:

• Take the time to learn first. Don’t jump into any investment without understanding it and being comfortable with it. Read “One Up on Wall Street” by Peter Lynch (Fireside, $15) or “It’s More Than Money — It’s Your Life!” by Candace Bahr and Ginita Wall (Wiley, $25).

• Don’t be afraid to take on some risk. Sticking solely to low-risk choices like bonds or money market funds dooms you to lower returns. Put some moolah in stocks, perhaps via an S&P 500 index fund. As long as you’re investing for five to 10 or more years, you can ride out any short-term market downturns. Learn more at www.fool.com/funds.

• Consider forming an investment club. Learn how at www.betterinvesting.org.

Ask the Fool

Q: Should I pay “points” on my mortgage? — V.B., Norwich, Conn.

A: Let’s define terms first. A point is 1 percent of the mortgage loan. On a $200,000 loan, one point would be $2,000. There are “origination” and “discount” points.

Origination points are sometimes charged for originating, or launching, your mortgage. Discount points serve to lower your interest rate (and thus your payments) and are optional. The idea is that if you cough up a little extra money at the beginning, you can pay less in the long run. The more points you pay, the lower interest rate you get.

Whether you should pay any discount points depends on how long you expect to be in the house. The longer you expect to stay, the more worthwhile it can be to pay points. Let’s say you pay a few points and then sell your home after two years. You’ll have enjoyed lower monthly payments due to the lower interest rate, but in just two years the savings probably won’t have made up for the amount you paid in points. If you paid $4,000 in points to save $50 per month, it will take you 80 months, about 6 1/2 years, to break even.

Learn more and try out various scenarios with online calculators at www.fool.com/homecenter and www.quickenloans.com/mortgage_ calculator.

Q: Where online can I learn about corporate shenanigans? — P.G., Escondido, Calif.

A: There are many enlightening Web sites. For example, click over to www.footnoted.org to learn about surprising financial report footnotes and to www.thecorporatelibrary.com for insights on how well companies govern themselves. Our Fool writers have also been known to uncover some shenanigans at www.fool.com/foolwatch.

My dumbest investment

Back at the end of the tech bubble, a friend of mine talked me into buying shares of an Internet software company that had dropped from $27 per share to $5. I bought in at about $7 per share and watched it climb over the next three months to $12 or so. To make a long story short, I ended up selling at about 35 cents! I learned not to be a pig, especially with a speculative stock. — B.P., Roanoke, Va.

The Fool Responds: We hope that before you bought into a stock that had fallen so far, you did considerable research. Many times, stocks fall for good reasons. The lesson you learned about not being greedy is a valuable one. It’s important to have an idea of what a stock is intrinsically worth, so that if it gets ahead of itself, you can consider selling. When you’ve made as much as you can reasonably expect to make, it may be time to move your money into a more undervalued company. Finally, think twice about speculating in stocks — it’s best to buy on conviction, not a prayer.