Women and Investing

In today’s world, the role of women has undergone a significant change and they can be seen holding important positions and carrying out equal responsibilities as compared to their male counterparts across various fields. We can see women contributing extensively towards politics, sports, business, law and even defence. Such a shift in their roles have not only helped them consolidate their position in the society but also helped them earn their own livelihood without having to depend on others. Therefore, it is important for women to understand investing and achieve financial independence and stability. Along with pursuing high-powered careers and becoming an integral part of a workforce, women should also give thought to becoming financially secure for the long term. It is not just enough to save but to make their money grow. Here are some useful and vital suggestions on how this can be achieved:

• Build a budget and an emergency fund: The first step is to ensure that the financial foundation is solid. In order to do so, a woman should build a budget for her expenses and take out a certain sum of surplus income as emergency fund. It should be of 3-6 months’ expenses and should be liquid in nature so as to ensure that it is readily available in case of emergencies and accidents. She can invest such an amount in overnight or liquid mutual funds so that they can be redeemed whenever the need arises (one day redemption), and the amount multiplies with the help of compounding instead of keeping them idle.

• Define financial goals: An important task for a woman is to list down short-term and long-term goals for both herself and her family. It is essential that before she invests, she should have a set of defined financial goals and priorities like her children’s secondary education, higher education, marriage, her own house, retirement, etc. so that she can plan her investments accordingly. Goals-based investing has shown to be successful, long-term strategy and one that women will likely be adept at. The challenge will likely be less defining the goals and more prioritizing them.

• Start investing early: The best thing to be done for investments is to start early. Longer term savings will compound over time and it especially important to do so as women as investors often find themselves at odds with the clock trying to get everything done. Thus, when they start investing early and consistently, the pressure of fulfilling the long-term goals is taken care of by compounding and regularity in investing.

• Disciplined investment: It is imperative that there should be a disciplined approach to investing. Irregular and inconsistent investing will hamper the invested amount along with the long-term goals to be fulfilled. This can be taken care of by investing through systematic investment plans (SIPs). A SIP helps in planning and realizing correctly the amount of wealth estimated to reach the defined goals. It is also a powerful tool which makes investing a habit and enables in making small investments into a large amount over a period with the power of compounding. Besides, it might be difficult to maintain consistency amidst the hordes of tasks to do on a daily basis. SIPs help take care of that problem by being automatic in nature and thus requires minimum supervision.

• Diversified investments: The saying ‘do not put all your eggs in the same basket’ goes for investing as well. In order to ensure that the investments are safe as well as provide wealth creation, it’s essential to diversify the investments. Equity oriented mutual fund schemes help in wealth creation but have more market risk than debt oriented mutual funds schemes. Debt schemes offer more liquidity and regular income but have interest rate risk and credit default risk. There are hybrid schemes as well which aims at balancing both wealth creation and lesser market risk. Besides, equity-oriented hybrid schemes or aggressive hybrid schemes offer equity taxation benefits.

• Plan for retirement: Retirement for women is equally important especially if there is no option of a regular pension to be received. In order to take care of the financial responsibilities and daily expenses, women should always plan for their retirement. Therefore, in order to not depend on their children or spouses for a steady income post retirement, they should start saving for retirement early. This helps them be financially secure even in the old age and less prone to vulnerability. There are many retirement plans in solution oriented mutual fund schemes which can help with the same.

Apart from the above tips on investing, women should also inculcate in their children the importance of financial planning and appropriate money habits. Children often tend to follow and imitate their mothers’ behaviors and practices. Thus, it is easier for them to learn from their mothers the significance of learning how to plan their finances. Also, it is important that they are aware of their financial conditions right from an early age and be a part of the budgeting exercises and investing processes. This will help them be more prepared in times of emergencies and grow up to be more responsible with their money. While the challenges are many for a woman in her various roles as a wife, mother or daughter, keeping the finances in order and being prepared will not only help her lead a much smoother life but also help in gaining confidence to face any difficulties life might throw at her.