The most significant difference between the women of our previous generation and today is the exposure we have received and the normalizing of women working with men to achieve family goals together. But even today in many households, women take a backseat when it comes to personal investments. Financial planning and investments are usually looked after by men with little to no contribution from women. This has to change as being independent is not just about earning money now but is also about personal financial independence after retirement. So how do women take charge of their own investments and how to start? Here are answers to these questions.
Why is it important for women to invest?
Before we go ahead, let us understand the need or the importance of investments by women. The need for having a nest egg or a substantial fund to tide over emergencies is paramount for every individual irrespective of their gender. Therefore, making timely investments at the earliest is crucial for every person.
The concept of men investing their income in various investment options is traditional but women despite earning now often do not focus more on investing. Any investments already made are usually last minute with the intention of tax savings and mostly belong to options under section 80C of the Income Tax Act. Such tax-saving investments do not always serve the purpose of wealth building as they are not well thought out or goal-oriented.
Women even today not only in India but across the world face a disparity in the pay scale as compared to their male counterparts. Thus the only better option for wealth building and achieving long-term goals is by investing smartly. This means understanding the goals and the available options that meet the required parameters and also provide the safety of the corpus.
How can women prepare themselves before investing?
Now that we have understood why women need to invest regularly, let us now focus on how to start and the steps that need to be taken to prepare for the same.
Trust your instincts
Investing is an art or a skill that needs to be understood and nurtured over time throughout the investment tenure. Many women even if they are confident in their workspace or confident in general, tend to doubt themselves when it comes to investing or handling personal finance. The first thing to work on is this attitude and believing in one’s ability to understand the core concepts of finance and investing. Therefore, it is important to stop second-guessing oneself and trust your instincts.
Ascertain your disposable income
One of the many principles of successful investing is by doing so using disposable income. It is therefore important to understand the available disposable income as the starting point to build on a portfolio. The way to do this is to calculate the monthly budget and set aside the surplus income for smart investing.
Identify investment goals
The next step is to identify the investment goals. It is often seen that women tend to have more goal-oriented investments like education for children, weddings, retirement planning, etc. These are the broad goals but it is also important to save a nest egg to fulfill one’s dreams or passions. This type of goal-based investing helps in ascertaining the amount that needs to be set aside each month as well as choosing the right investment options that can meet such goals in the least time frame.
Know available investment options and choose based on personal risk-return perception
There is an abundance of investment options today and the only decision to make is to choose the right option. One of the prime factors that need to be considered while choosing the right investment option includes the risk-return perception. Each individual has a different risk appetite and returns expectations. Therefore it is important to evaluate each plan on personal risk-return parameters rather than simply adopting some suggestions. Other factors that need to be considered are capital investment, investment horizon, taxation, etc. Evaluating an investment option based on such parameters will help in curating an investment portfolio that is able to meet the unique needs or investment goals of every woman.
Make a financial plan or seek professional help
Most women often do not have much time or energy that needs to be devoted to cultivating an investment portfolio to meet all the expectations. At this time, it is important to not be discouraged but to be smart and use all the available help in this regard. It is always better to seek help from professionals rather than avoid investment planning simply due to a lack of knowledge, time, or any other reason.
Key points for women to remember before investing
The starting point to investing may be difficult but there are a few other points that need focus too for successful investing. Some of such key points are mentioned hereunder.
Do not lose confidence in the face of mistakes
Most women often tend to go under a shell when they make a mistake. What needs to be understood and accepted is that it is ok to make mistakes. The important point is to take lessons from such mistakes in investing and not repeat them in the future.
It is a fact that any new venture can be mastered only through constant learning and unlearning. The changing market trends and constantly evolving investment options need a thorough evaluation. It is a constant learning practice that makes the difference between an investor and a successful investor.
Keep adjusting to changing goals
We often face many life-altering situations and change the course of our actions or life goals accordingly. Investment goals function in a similar manner and at such time, it is important to alter our investment portfolio according to the changing goals. This will save them from being redundant and actually contribute to meeting the altered goals.
Track your portfolio at regular intervals
Investing does not amount to parking funds on a certain investment and forgetting about it. It is equally important to constantly evaluate them due to the dynamic market conditions and economic conditions. This will help in weeding out obsolete investments that may not be giving adequate returns or are no longer suitable to meet the investment goals. Rebalancing the investment portfolio will help in getting the best investment options in the portfolio and getting maximum returns from the corpus.
There was a time when women’s participation in investments was negligible. However, the scenario has changed drastically with women taking charge of their finances and not being dependent on their male counterparts for their financial security. The investment market has also realized the untapped potential of women investors and therefore has come up with many investment options that are women-centric and help them in gaining a maximum advantage of their savings and investments.
Some investment options that can be a good addition to an investment portfolio are stocks, mutual funds, PPF, ETFs, etc.
The prime factors to be considered before investing are risk and returns expectations, investment horizon, capital required for investing, tax benefits, liquidity of investment, etc.
Women can build their wealth through simple steps like saving at least 10% of their income every month and strategically investing the funds in assets that can give good returns to meet their investment goals.
The personal risk-return perceptions of every individual are different and there is no one pattern fits all situation for men or women investors. Although women are traditionally considered to be risk-averse, there are aggressive or risk-averse investors in both men and women. Therefore, investing in aggressive investment options should be based on personal risk appetite and cannot be generalized based on gender.