Demystifying investment choices critical for greater financial freedom of women This International Womens Day, buy or gift an investment plan, or inspire your loved ones to opt for one, as discount coupons will expire but smart investment will go a long way to secure your future and empower your dreams
The market and financial institutions have traditionally focussed on the male consumer—the proverbial breadwinner, the more economically independent and mature consumer segment, who can be trusted to have better purchasing power and investment inclinations. So, manufacturers, service providers and marketers have conventionally built, designed and marketed their products and services for a He-economy.With technological interventions, and more and more women completing their education, joining the formal economy and emerging as informed buyers and potential investors, India Inc. has been finally paying attention to the historically ignored and dumbed down consumer segment. With India’s ambitious vision to becoming a developed nation by 2047, the agenda the next 25 years is to take measures to power a women-led development — empowering women as buyers, sellers and investors.
ET SpotlightInvestor Bias Vs TheGreatInvestHer EconomyIndian financial institutions too, especially investment platforms, are now seriously addressing the need to tap into the female investor base or #TheGreatInvestHer. Indeed, there’s a growing realization of the urgent need to empower the #InvestHer economy and reverse the role of women as mute spectators to a critical decisionmaker with significant purchasing power and financial freedom.
However, often what deters women from opting for investment plans is the mindset that they don’t know much or that investment is a man’s world involving complex finance concepts; lack of financial education/awareness; initial fear of making mistakes; or lacking enough freedom to invest their personal money without taking the support of male members of the family.
Steps to achieve financial freedom:
1. Choose a combination of investment products and instruments: For women who are looking to gain financial freedom, it is important to spell out right at the beginning that all women in the target age group from 22 to 50 can aspire to achieve financial independence by choosing a combination of investment instruments given their aspirations and life-stage requirements.
While saving for your future financial goals is the bare minimum in order to stay financially fit and agile, mere savings will not help you tide over the rising cost of living or inflation. To counter inflation, the money saved needs to be deployed smartly in productive asset classes and investment avenues.
2. Invest in a portfolio that reflects your financial goals: How much a woman should invest will depend upon a number of factors: a woman’s financial situation including her monthly net pay/takeaway and the monthly expenditure window; monthly loans/EMIs; risk profile; broader investment objectives; financial goals; investment time horizon. Depending upon these factors, you can choose multiple investment products to grow your assets in a timely manner. The golden rule to remember is there is no copy-cat formula of the ‘one’ investment portfolio; it has to reflect your unique life choices and situation.
3. Define your investing timeframe as per your goals: The golden rule is to start early to reap the benefits of compounding. Since today’s Gen Z and millennial working women are an active stakeholder in chalking out their financial future, depending on the time in hand to achieve their financial goals, it is important to classify them into short-term, medium-term, and long-term.
4. Start investing early: “Compounding is the magic of investing,” said American businessman and financial commentator, Jim Rogers. Simply put, compounding is earning returns on both your original investment and on returns you received previously. For compounding to work, you need to reinvest your returns back into your account.
So, let’s look at the stages of compounding in three age groups: women in their 20s, 30s, and 40s:
For example, let's say Shanaya’s goal is to have Rs 10 lakh by the age of 65, and assume she earns an annual stock market return of 10%.Scenario 1: If she started investing at age 25, she would only have had to contribute about Rs 200 per month to an investment account to reach her goal of Rs 10 lakh by the age of 65.Scenario 2: If she waits until age 35 to start investing, she'd have to contribute over Rs 500 per month, more than double of what she would have had to invest if she had started a decade earlier.Scenario 3: And if she waits until 45 to start investing, she would have to invest nearly Rs 1,500 per month to achieve her goal, three times the monthly investment amount she would have had to invest if has started two decades earlier – to achieve the same financial goal.Source: EconomicTimes
5. Ensure risk diversification to secure your investments: Invest the money across diverse instruments such as mutual funds, sovereign gold bonds (SGB), equity markets, and National Pension System (NPS). Such a risk diversification or a prudent mix would ensure that the risk is distributed over a variety of instruments. There should be a healthy mix of debt and equity to counterbalance the volatility that equity markets are susceptible to.
6. Understand the power of compound interest: Another quick fact, simple interest means interest earned on your principal. Compound interest occurs when you earn interest on the principal amount as well as the accumulated interest amount over successive periods. This is popularly known as the 'snowball effect'.
To illustrate, Koel and Saba both invest Rs 100,000 each in an investment avenue that offers an annual interest rate of 10% for 10 years. While Koel chooses simple interest, Saba opts for compound interest.
At the end of 10 years, Koel's total corpus would amount to Rs. 2 lakh. On the other hand, Saba would earn a corpus of Rs. 2.59 lakh.
This is because in Koel’s case, the interest was calculated only on the initial principal amount of Rs. 100,000. However, in Saba’s case, the interest earned each year was included along with the principal to calculate the interest for the next year. This helped boost Saba's earnings substantially.
7. Make thoughtful investment plans to secure yourself: It is critical for women to make thoughtful investment plans to secure their life in the long run, and this includes those more vulnerable among working women, such as single mothers. As a woman, you must also invest to be prepared for emergencies or major disruptions such as rare diseases, death, divorce etc.
Making smart investments:
Today, with rising access to formal education and skill development training, an exposure to the corporate and startup world, consumer brand culture, digital communities and shifts in India’s own cultural landscape, women are increasingly aspiring for financial freedom.
Retirement planning is also critical for women to ensure they do as part of their financial planning, as high medical costs, balloonning education expenses, and other costs is expected to make it tough to sustain a comfortable lifestyle in the post-retirement phase on just savings alone. As part of their retirement planning, women should consider drawing up a financial plan that enables them to grow their investments over time and offer returns to counter the effects of inflation.
Today, in the backdrop of a tough job market, inflation, existing gender pay gap, the pandemic having led to several women exiting the formal workforce, and the general global macroeconomic gloom, it is only wise for women to start building their assets with a sound investment plan, in order to gain long-term financial agency.
Here’s a look at some of the products for women to consider investing, through StockHolding, to put her on the path to financial freedom:
Mutual FundsMutual Funds are ideal for investors with diverse investment goals. Mutual Funds across offer a mix of growth, liquidity and tax benefits. They can be classified based on asset class: Equity Funds, Debt Funds, Money Market Funds, Hybrid Funds; based on structure: Open-ended Funds, Close-ended Funds, Interval Funds; based on investment goals: Growth Funds, Income Funds, Liquid Funds, Tax-saving Funds.
For investing in Mutual Funds, you can choose the method of Systematic Investment Plan (SIP) that helps you build wealth over a period of time. SIP can be started for as low as Rs. 500 per month and gives you the benefit of the power of compounding and rupee-cost averaging. SIP payments can be automated by providing an online mandate. Experts say that this is the best investment for women with moderate to high-risk appetite.
Women investors can consider investing in the Equity Linked Savings Scheme (ELSS). ELSS has a lock-in period of three years and has the potential to generate significantly higher wealth in a medium- to long-term investment horizon. The scheme also helps to save tax under Section 80C of the Income Tax Act. Lower tax rates, coupled with higher returns ensure the best post tax returns.
Women, waste no time and avail all the necessary information on investing in Mutual Funds at the StockHolding website, and while on the website, do check out FundFinder, a paperless and Intelligent Online Mutual Fund Investment Platform for seamless investment, management and monitoring of all Mutual Fund investments at one place.
Sovereign Gold BondsSGB can be bought by paying the issue price wherein the bonds will be redeemed on maturity in Indian rupees based on previous three working days on a simple average of closing price of gold of 999 purity published by India Bullion and Jewellers Association Ltd (IBJA).
While the minimum permissible investment is one gram of gold, the maximum limit is that of four kg for individuals; four kg for Hindu Undivided Family (HUF); and 20 kg for trusts and similar entities notified by the government.
There are several benefits including hassle-free ownership of gold in Demat form, without any physical possession, which takes away risks and any cost of storage; bonds can be used as collateral to obtain a loan from banks. To invest in Sovereign Gold Bonds through StockHolding, click here.
DematA Demat account helps investors hold shares and securities in an electronic format. As #TheGreatInvestHer, this is your opportunity to leverage the great StockHolding advantage by availing Online Demat option and Online Trading using the platform’s rich research and expert opinions at one place. StockHolding enjoys the trust of lakhs of investors for managing their securities backed by highest integrity, confidentiality and transparency.
A wide network of 200+ branches across India, coordinated through a centralized dealing room for trading in equity and commodity also makes it an advanced platform.
NPSIntroduced by the Indian government to help you aggregate funds for your post-retirement life, National Pension System (NPS) is a market-linked savings scheme. Regulated by the Pension Fund Regulatory and Development Authority (PFRDA), NPS enables an individual's savings to be invested in a mixed portfolio, including equity, government bonds, liquid funds, corporate bonds and fixed financial instruments.
The minimum contribution you need to make is Rs. 1,000 in a financial year and minimum Rs 500/- at one time. NPS gives you two options—to choose assets as per your choice or the money gets invested automatically as per your age. Check out the benefits here.
InsuranceWhether it is to protect your family against the burden of high medical bills in the event of medical emergencies; or assure your family’s financial security in the case of unfortunate loss or accidents of key earning members; or secure your children’s education; or even to ensure long-term wealth creation for you and your family, it is prudent for women to consider investing in insurance products. Women can opt for insurance policies that come with a comprehensive coverage, or are customized to cater to diverse needs at different stages of your life, such as home insurance, health insurance, motor insurance, among others. To get insured through StockHolding, Click here
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(This article is generated and published by ET Spotlight team. You can get in touch with them on [email protected])
This story originally appeared on: India Times - Author:Faqs of Insurances
