This women’s day there was definitely a higher number of greeting videos and content centred on financial literacy, financial independence and hands-on investment decision-making among women. An excellent step in the right direction.
The need for women to be more invested and proactive in terms of their personal finance and investing is quite imperative.
The DSP Winvester Pulse 2019 Survey revealed that only 33% (or about 1 in 3) women make independent investment decisions.
It is the numbers that follow this that will boggle the mind, because they indicate that women lack initiative (not support) in making financial decisions independently. The same study further noted that of the 33% who did make independent decisions, only 30% did so of their own initiative – the rest had to be nagged by either their parents or their husbands! Moreover, the study found that 40% of husbands actually encouraged their wives to make their own financial decisions.
So how can young women today put their best foot forward in what (the numbers seem to say) is the last domain that they are yet to conquer?
Understand the power of investing
The idea of investing is that your money earns for you. You give yourself the option of earning more money over time, by exploring a variety of investment options, based on your risk appetite.
Over many years of staying invested and the power of compounding, your capital multiplies. Compounding refers to reinvestment of earnings (or interest) at the same rate of interest annually, to consistently increase the amount invested in the first place, year after year.
For example, let us say that you invest Rs 100 at 10% interest for 5 years. You will get Rs 10 worth interest in the first year, but in the second year, you will get 10% interest on 110, or Rs 11. In the third year, your interest is calculated on Rs 121, so you earn about Rs 12.1 in the third year, and so on. Picture that on a larger scale of say Rs 25,000.
Develop a strategy to save
If you are a big splurge, you might have trouble investing because you are unable to save. You could try talking yourself out of burning through an entire month’s salary on those shoes or on that treatment, or on that holiday you so badly need. But in all probability, you have already tried that. If it hasn’t worked, how about having your savings target amount taken away from you before you can hit buy? There actually is the option of a fixed date direct debit wherein you can have say Rs 5,000 per month debited from your account and credited to a couple of mutual fund houses. Having this fixed amount, debited on a fixed date to a fixed mutual fund every month (without fail) is what is known as a Systematic Investment Plan. You can select the day after salary day for this to happen.
If you do happen to succeed in talking yourself out of a few splurging sprees, then you could also do lump sum investments as and when you accumulate sufficient savings.
Set financial goals (and give yourself treats)
“I am saving up for a holiday in Peru” is going to do a better job motivating you to save than “I have to save.” Set short term, medium term and long term financial goals. In the short term you might plan holidays or big ticket purchases like large screen TVs, high end gaming gadgets or home appliances. In the medium term you might have a car, or a new home (or an MBA perhaps?) and in the long term, you might want to plan for your retirement by taking life insurance plans and the like.
The retirement planning can, however, wait until your 30s or early 40s (but preferably no later). If you are in your 20s, enjoy a good life with your money. Invest in building your skills and in increasing your global exposure by saving to afford the education, entertainment and travel that will assure these.
Do a little reading to educate yourself
Angel Broking has a universe of financial content online, on the website, youtube, etc. From beginners to experts- all levels are well covered in the universe of financial content.
Understand the following by reading up online:
- Different investment types: Traditional (like Fixed Deposits, PPF, Real Estate, Gold) and Contemporary (Stocks, Mutual funds)
- Risk reward benefit of all the investment types cited above
- Inflation and how it affects your investments
On the Angel Broking website, you can find blogs, videos and podcasts (choose which mode works best for you to absorb information) explaining various investment basics and FAQs.
Don’t put all your eggs in one basket
The reason that we suggested a variety of investment options for your research and reading is the need for diversification. Risk exists in almost investment type and similarly rewards vary in all investment categories. Additionally, if the rate of inflation exceeds the rate of interest you are earning, your money is worth less than it was the previous year. At the same time, when choosing high reward investments, the risk is usually correspondingly high and therefore it is imperative that you put your money in different places to safeguard against eventualities. Travel advice blogs will often tell you to keep your cash and valuables safe by putting it in different places in your room/ luggage. That way, should a thief find their way to your stuff, they are unlikely to discover all your cash and valuables. The same funda is at work when we say diversify your investments.
EveryoneCanInvest. Investing is for everyone irrespective of age, gender, occupation. You can start the upcoming financial year by investing right with Angel Broking.