Achin GoelBonanza Portfolio
Today when Indian women have moved-way beyond their traditional arena – a shift right from managing households to managing multi-national companies and even governments, it has become critical for women to take-on the task of managing their financials as well. In India, this task is usually undertaken by the male members of the family as women tend to undermine their ability to manage their own finances.
For all the women reading this article, we would like to make a point that while women are seen to be the worst enemy of their money, they are equally best friends of their money as well. Women usually avoid managing their own finances. The confidence in the decisions taken with respect to investing is usually seen lacking when it comes to women. This makes them their money’s worst enemy. At the same time, women managing their finances are very cautious and they usually take calculated risks after consulting many people whom they believe know about the subject. This makes women their money’s best friend. So the first step to managing your finances would be to ‘take ownership’ of the task. Investing would mean differently for women in different roles. A single parent may not invest in the same way as an unmarried due to various constraints. Hereby we describe various investments for women in various stages of life:
Unmarried women:
If you are unmarried and are undertaking your higher studies, or working full-time or doing both on part-time basis, you are at that very particular juncture in your life when you have all the freedom you need to try new things, take risk, and go the extra-mile. This is the best period when one should ideally start investing. Investing is not a one-time activity; it’s a life-long process. Like any other task, in investing too you may need to give some time to learn about various instruments and risks associated with them, make investment, and learn from mistakes (if you make one). This phase would act as a back-bone for your future investing.
Being unmarried, you may be saving for various reasons – for your higher education, your marriage or other long term goals such as buying a flat. When it comes to investing for short term goals like your higher education which may be due in 3 years or sooner, you do not have much time to give to your investments to grow. So if some investments in equity shares or mutual funds go wrong, you may have to sell them at their prevailing market price even at a loss in order to honor your education needs and goals. For such short-term investments it is advised that you invest in traditional instruments such as bank FDs, post-office deposits, liquid mutual funds and FMPs. Here the possibility of capital loss is close to zero and these investments can be withdrawn with limited deductions (for premature withdrawal). Alternatively you may also opt for hybrid savings accounts of banks which shift your money in savings account above a particular threshold viz. amount above Rs. 1 lakh to fixed deposits. This way your money will earn higher returns as well and at the same time you will enjoy high liquidity as availed in normal savings account.
For long term goals like buying a car or buying a house for example, you may choose to invest into good rated equity mutual funds, bullion or debt mutual funds. Amongst them, you may choose the midcap equity funds as they have a greater growth potential in longer term (greater than 5 years). There are various sites such as moneycontrol.com or valueresearchonline.com which may help you with choosing the best funds.
Working married women:
If you are married and working women, you may be having the twin tasks of managing your house-hold and your job/business at the same time. You might not be having the sufficient time required to make informed-financial decisions and to track them regularly. So the best investments for you may be the ones that have minimum/limited risk and the ones that manage themselves or take assistance from a good financial planner. As an earning member of the family you need to plan for your children’s education, their marriage, your retirement and other goals as buying a flat or car. If you are investing for your retirement, invest in PPF and NPS which are the most tax-efficient schemes and are the best suited for retirement planning. When planning for your child’s education and marriage, you are advised to plan in consultation with your financial advisor and make investments in recommended asset class like Equity, Debt, Corporate FD’s, Bullion etc. Diversification across different asset class will help minimize concentration risk and proper plan will help you meet your goals with higher expected yield. Asset allocation shall depend upon your age, your risk profile and risk profile of your goals.
As mentioned above, investing is a life-long process and tracking your investments is equally important as making the right investments. So make sure you review the performance of your investment portfolio frequently (recommended atleast once a month)
Housewives:
If you are a housewife and personally do not have any source of income, you may look for investing that very savings you make month-on-month by efficiently managing your family’s budget. We are pretty sure you would want to make that every penny count. Well, if you are a housewife and do not have a source of income, you can generate one from your own savings. Yes, money earns money in today’s world. Get your money at work rather than keeping it idle in your safe. Invest your savings into hybrid bank accounts as discussed above which earn higher interest vis-à-vis normal bank accounts. You may also opt for recurring deposit of Indian post which allows you to invest every month and gives an attractive interest rate of 8.3% on your investments. You may also invest into electronic form of gold every month with as low as Rs. 500 a month through investing into gold mutual funds. This way you will save a lot on making charges you pay (approximately Rs. 350/gram) when you buy jewellery and also earn the same return as physical gold.
Single women (widow) / Single parent (divorced)
If you are a widow or divorced, you may be fully responsible for earning for yourself and your kids, their education, their marriage, and your own retirement as well. In either case, you would like to be ready for the worst independently, wouldn’t you? Hence, you should be looking for investments that do not leave any of your goals to chance.
If you are in your twenties or early thirties, you have substantial time to give to your retirement. Hence, you may invest into PPF or National Pension Scheme (NPS). Both of these are highly tax-efficient, safe and low-cost investment options. While PPF is a 15-year scheme earning a return anywhere between 7-9% (as per yield on 10-yr Government bond), NPS is a market-oriented scheme that is similar to a high-rated mutual fund with ultra-low costs. You may invest the proceeds of both these schemes to buy an annuity plan from insurance company which may act as pension for you after your retirement.
Build an emergency fund which is sufficient to cover atleast your 3 month’s house-hold expenses (including EMIs if any) by investing in a liquid fund or hybrid savings account. As discussed above, opt for investments in various asset classes in consolation with your financial advisor to plan for finances for your kid’s education and marriage. Buy a term-insurance plan to cover your family from misfortunes in your absence. Above all, review your investment portfolio every month to weed out any unwanted risks to your goals.
Happy Investing!!
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