Why investment for women is important?
Let me reword my question to trigger a different point of view.
Why we must encourage women to practice investment?
Like exercising renders self confidence, investing money by self, inflicts a sense of financial independence.
Though it is true that investment cannot change lives in few years, but everyday one spends learning investment is like an incremental gain.
This is one sure step towards achieving financial independence in life.
What fantastic society it will be to live into, which has majority of women who are financially independent.
Women not dependent on father, husband, son, any male, will shape a society which is 100 times stronger than what it is today.
From the point of view of women empowerment, investment is a powerful tool.
Idea is that, all women must build a separate, independent investment portfolio for themselves.
If they need some advice to start with, they can take it. But they alone must build it.
#1. How to build an investment portfolio?
How a women can build an investment portfolio for herself?
These days it can be done using any smartphone.
Download a mobile APP like FundsIndia.com and you can start investing.
Using such an app, investing for women becomes easy. One can buy following investment options using this app:
- Mutual Funds.
- Fixed Deposits.
A clever mix of above four can form a healthy investment portfolio for women.
Expert investors also include the following in their portfolio:
- Real Estate.
- Life Insurance.
But I will suggest that for a beginner (specially women), starting with the first four (mutual funds, ETF, Stocks and Fixed Deposits), is more than enough.
Why I say more than enough?
Because mutual funds alone can be subcategoriesed as below:
- Debt based mutual funds.
- Balanced mutual funds (Equity + Debt).
- Equity based mutual funds.
Though these subcategories of mutual funds can be further sub-divided, but let’s keep it simple for this post.
Let’s drill deeper into the above 3 types of mutual funds….
#1.1 Debt based mutual fund:
They are least risky, but give lower returns.
What means by risk? The associated risk is in the possibility to make a loss.
So when one invests in a debt based mutual funds, the possibility to make a loss is less.
But the probability of make big profits is also nill. Profit will only be below the average market returns.
In India, in todays times, a debt based mutual funds can garnish close to 7% per annum returns.
For a beginner, low returns should not be a problem.
Because when idea is to learn a new skill, taking less risk is advisable.
But do not start investing yet, we have something better than debt based mutual funds.
Read more about SIP in debt based mutual funds.
#1.2 Balanced mutual fund:
They give slightly higher returns, but post little risk.
They very design of balanced mutual fund is such that, it becomes an automatic first choice for a beginner.
I personally think that investment for women must start with a balanced mutual fund.
On one hand it has a security of a debt fund.
But on other hand, it also has a potential to give returns which is at least at par with inflation.
Also read about dividend paying mutual funds in India.
#1.3 Equity based mutual fund:
Generally when we hear the term mutual funds, people primarily mean ‘equity based mutual funds’.
These are those mutual funds which give fantastic returns when held for long term.
But investing in equity based mutual fund is suggested only when one completely understands what it means by “equity”.
Read more about direct equity investment.
For the moment, lets limit our reach only till balanced mutual funds.
#2. Mutual Funds for Women
A combination of few mutual fund (of different types) alone can build a complete investment portfolio for women.
One may not invest separately in stocks, and fixed deposits.
This is the reason why, investment for women can start only with Mutual Funds.
Once the person begin understanding, and get comfortable with mutual funds, further diversification in ETF and direct stocks can be considered.
I personally feel that, to get a reasonable understanding of mutual funds, one need to practice investing in it for at least 1-2 years.
The learning time is looking longer?
Do not worry.
The best part with this learning process is, there is nothing to mug-up.
One learns here by practice.
This makes the investment learning more of a fun.
So women; you all can start from today.
Start learning about investment and simultaneously build your investment portfolio.
Quick tips is to start with a good balanced mutual fund.
#3. Men are better investor?
This is a big myth.
If this was true, probably this world have been richer than what it is today.
The truth is, men are likely to make the same mistakes as women when it comes to investment.
But as less women participate in the investment process, men seem to dominate.
This dominance is not because men are skilful investors, but because they have more numbers.
You will appreciate the fact that women are more prudent and wise money managers.
This is why majority women run their homes, probably as professionally as a corporate CEO.
It may be true that women may not be handling money directly, but they influence and control virtually all household spendings.
Consider this, men earn and carry money, but women control the spendings.
This act may boost the male chauvinism, but this also highlights a great possibility.
Give this money in hands of women, and see how better they mange it.
When it comes of managing money, it is not only expense management, but also investment management.
Lets allow our women to practice investment at least for themselves.
Do not burden them with responsibility of investments linked to retirement, higher education, home purchase etc.
Let them invest money “for themselves” alone.
What is the idea?
All women must build a separate, independent investment portfolio for themselves. This will lead them to financial independence over time.
#4. Why Financial Independence for women?
For a normal happy family, there will always be someone (men) available to take care of the women.
Then why financial independence for women?
The point is not that, whether there are men (around) to take care of women or not.
If they are available it is good.
But the real objective is to make women realise the necessity of self independents.
Self independence gives women the ability to preach and practice their choice.
We all have women in our family who manages their homes. We normally refer to them as housewives.
They do their job selflessly with almost zero monetary gains, right?
People do jobs in offices and get a compensation. Housewifes don’t. Why?
The reason being, this has been the tradition since long.
Moreover, we also take our women for granted (specially housewives).
Even working women are not different.
They earn money, but only few of them actually manages their money.
There are only handful of women who can claim to manage their investments on their own (independently).
This must change.
When women start to handle investments of their own, they are taking giant leaps towards fiancial independence.
Investment is not just one act of buying and selling mutual funds.
It also has a whole lot of socio-physchologial benefits for women.
More financially independent women will make this society stronger and more ethical.
#5. Good starting point for working women.
Working women should start with saving more money.
They must target to save at least 40% of their paycheck.
Divert the 40% savings to a recurring deposit. Keep it like this for at least 6 months.
#6. Good starting point for housewives.
They must start getting compensation in first place.
They must open a savings account, and then install the bank’s mobile app on their phone.
Let the compensation be paid to them online.
Housewives must first adapt to see their savings grow month after month.
Enjoy this feeling of having your own money and see it grow.
Take care not to spend this money on anything else except on yourself.
This is a very important condition to make this concept a success.
Women can use this money to do shopping, personal care etc.
But do not give it to your fathers, husbands, sons etc.
Let the sense of independence start to build inside you.
Keep it like this for at least 12 months.
#7. Use savings to buy investments.
Investment for women is difficult not only because women know less about it, but they also think very less about it.
During the savings phase (as explained in #5 & #6), women must start to read about money management and investment.
By the time they are ready for investment, they will also have reasonable savings behind them.
This is the time when investment for women actually starts.
Install the mobile app like the one offered by FundaIndia and start your investment journey.
#7.1 What investments women can buy?
Make it a point that you are thinking the right way.
First, you must answer why you are investing? You must invest for financial independence.
Second, you must realize that financial independence cannot happen in couple of years.
Probably you will have to invest consistently month after month for 10-15 years at stretch.
So what is your investment horizon? 15 years (minimum).
Third, it is also important to think about investment in terms of portfolio building.
Whenever you are buying a new investment, do not treat it as an isolated activity.
Consider it as an act which has increased the size of your investment portfolio.
If current size of your investment portfolio is say Rs.Zero, then consider giving yourself a target as shown below:
Idea is to start building an ever growing investment portfolio.
It is a big and healthy investment portfolio that can ultimately make a women financially independent.
With this backdrop of a clear financial goal, investment holding time, and buildind an investment potfolio theory, you can now ask what investment you can buy?
Suppose you earn Rs.2,000 each month. Following should constitute your investment portfolio (in your starting days):
- Cash (25%): Rs. 500 (recurring deposit)
- Balanced Mutual Fund (25%): Rs.500 (monthly SIP).
- ELSS (25%): Rs.500 (monthly SIP).
- Index Fund (25%): Rs.500 (monthly SIP).
Investment for women is a tool that will make them financially independent.
It is essential for women to start practicing self-focused investment from today.
Self focus may look like a selfish thing, but it is not.
Till now women hardly manage investments. But this is high time when they can start doing it.
Self-focus will only motivate women to practice investment without fail.
Begin humbly. I am sure many women will find it easy to start a Rs.500 SIP’s as explained above.
As the investment amount is not big, the risk is also not too high.
I would specially like to motivate the housewives to start the process of investment as explained in this blog post.
In case you have any queries, feel free to ask in the comment section below.
Have a happy investing.