How should women chart their financial course?
For many women, the thought of managing finances may seem intimidating. Patriarchal conditioning through generations continue to colour women’s attitudes towards money management even today. Consequently, many women despite being financially independent continue to entrust the task of saving and investing to their fathers, brothers or partners because of the ingrained perception that matters of the wallet are better handled by men.
However, there is a growing awareness, especially among young women that managing finances is a life skill and not a gender role. With an increasing number of women joining the workforce, there has been a collective dawn of realization that delving into the gamut of financial planning only in the wake of an unforeseen circumstance can land them in dire circumstances.
The importance of drafting goals
While men and women today are blessed to have a plethora of resources that has enabled them to imbibe the basics of personal finance with tremendous ease, your investment choices may yield unfavourable outcomes if you lack clarity about your goals. Setting financial goals with appropriate timelines is akin to odometer readings in your financial journey. Only when you know what your financial requirements will be at different stages of your life, will you be able to make sound financial decisions. Elora Chakraborty, a doctor based in Kolkata, says “While some goals like saving for retirement and medical exigencies are common for most people, women need deeper introspection because their chances of having to take career breaks are more than their male counterparts. During such phases, you cannot expect to continue with the same financial plan for your long or short-term goals when you do not have a regular income.”
Mutual funds - a convenient starting point
Parvati Iyer, chief investment officer at Femwealth, an online investment management platform for Indian women explains that financial needs of women tend to be quite different from that of men and how mutual fund investments can be a practical solution. She says, “Women need more money put away since they live longer than men and some of their goals can vary too. The variety in mutual funds is a big plus for diversification. Starting from gold ETFs to safe government bonds to various kinds of debt and equity funds, one can create an optimal blend based on asset allocation. Tracking this over time is also easy. This is so because most of the data on a particular fund is transparent and available in the public domain in a standard format. Very few assets have this level of detail and allow for day to day tracking.”
The flexibility afforded to mutual fund investors also makes them an attractive investment option for women. She says, “With increasing awareness many women are also discovering that there is a mutual fund solution for each type of need or goal. Liquid Funds are a good option to park your contingency funds and have potential of generating better returns than FDs. Equity funds are good for long term goals. The best part is that you can start small, save and invest regularly. And see the power of compounding in action.”
Reviewing financial plans from time to time
Reviewing asset allocation also plays a crucial role in maintaining financial preparedness for any adverse situations and this assumes greater importance in the case of women because a large chunk of the female population continues to be financially dependent on their spouses. Sameer Kaul, MD and CEO of Trust Plutus Wealth Managers says, “Any investment decision is a bet on a future possibility and since the future is uncertain there are multiple outcomes expected for each decision. Any amount of detailed analysis or skilled assessment of an investment opportunity is still subject to surprise in the future. Hence there is a need to have enough diversification in a portfolio and re-allocating assets when needed so that the sum of the parts is greater than the individual investment opportunity.”
This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund