The Hindu Business Line : Are women no good at investment?

Poverty is more common among women than men; the average woman has less cash in savings than her counterpart; "and around twice as many women as men say they find investing in the stock market a daunting experience."

Are women no good at investment? "Quite the contrary - studies suggest that they are better at playing the stock market than men," says Paula Hawkins in `The Money Goddess' (www.crosswordbookstores.com). She cites a 2005 survey of 1 lakh investment portfolios by `Digital Look,' a financial information Web site: "It found that in the year to May 2005 the average woman's portfolio rose by 17 per cent, beating not just the FTSE All Share Index, which rose by 13 per cent, but the average man too: their portfolios rose by an average of just 11 per cent."

The reason why women tend to do well is simple, explains Hawkins. "Women are cautious and pragmatic; they are less gung-ho than men; they don't try to be too clever. They don't kid themselves that they are going to be able to make a fast buck. To put it simply, they aren't macho investors." She cites Nicola Horlick's view that women are `shrewder judges of character, enjoy more commonsense and can read a situation more clearly and instinctively than men'.

Despite these clear advantages, why do women lag behind in `building up comfortable nest eggs via the stock market'? Because of lack of confidence, diagnoses the author. "We feel patronised by bankers, financial advisers and stockbrokers, and as a result we tend to avoid stock market investment altogether. This is a mistake. We need to take greater risks with our money, and we need to do it while we are young, while we still have time to recover should we suffer any setbacks."

You can save a lot of money by making relatively minor adjustments to your everyday lifestyle, advises Hawkins. Examples of such adjustments are: `making your own lunch instead of buying a sandwich to eat at work', `skipping your morning grande latte', and reconsidering the futility of smoking - think of all that money you spend a year `to yellow your teeth, age your skin, render foul your breath, fur up your arteries and blacken your lungs'!

To those who have `a tendency to make impulse buys' the author's sage counsel is to leave your credit card at home. "In extreme cases try freezing your assets," suggests Hawkins. This is `how': "Put your card in a plastic bag, pop it into a mug full of water and stick it in the freezer. That way you cannot make any rash decisions - you have to wait for your card to thaw out."

Empowering lessons.

Primer on forex

Spanning all the time zones of the world and working round the clock is the market that facilitates the exchange of currencies: a market that has seen tremendous growth in recent years, owing to `the increase in world trade and the lowering of capital controls.' Read about it in Dun & Bradstreet's `Foreign Exchange Markets' (www.tatamcgrawhill.com).

Forex transactions happen both at the retail and the wholesale level. In the former category are currency exchange activities concerning travellers and tourists; "the total turnover and average transaction size are very small, and the spread between buying and selling prices is very large." The wholesale segment, often called the interbank market, has the commercial banks, corporations and central banks as the key players.

How big is the forex market? About $3 trillion as turnover per day, of which about $2 trillion are in spot, forwards and FX swaps, and the rest in OTC (over-the-counter) derivatives such as `cross-currency swaps and options and all interest rate derivative contracts'.

The market is largely OTC. "There is no single market place or organised exchange, electronic or physical (like stock exchange), where all trades are executed between exchange members. The traders sit in the offices (forex dealing rooms) of major commercial banks around the world and communicate with each other through telephones, telexes and other electronic means of communication."

The book has chapters on spot and forward markets, futures and options, swaps and hedging. Concepts are explained in a simple style, with examples. Sample this, on `triangular arbitrage', that is, arbitrage involving three currencies: "An arbitrageur purchases 10 lakh euros for $12.8 lakh. He uses the euros to buy 6,90,000 and sells these pounds for $12,82,020. This implies a profit of $2,020," assuming an exchange rate of: `EUR/USD=1.28; EUR/GBP=0.69; and GBP/USD=1.8580.'

With the law regulating forex changing rapidly, you may need to update some of the content in the book. For example, the liberalised remittance scheme discussion speaks of a cap of $25,000; but this was doubled to $50,000 in December 2006, and again to $1,00,000 a few weeks ago. Easy primer.

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