How should women choose the right investments at different stages of life?
Even if women are yet to break the glass ceiling in many spheres, they are closer to doing that than they have ever been. However, despite more and more women making their presence felt beyond the domestic realms and taking up new challenges professionally and personally, money management continues to be a male dominated terrain.
While change is underway with the younger cohort of women realizing the importance of knowing the tenets of financial management, there are hurdles galore when it comes to them being at par with men in this domain. One aspect of that multi-layered problem is the fact that women’s financial needs differ from that of men owing to their longer average life span and they tend to take career breaks to fulfill caregiving responsibilities. However, the lack of women-oriented financial products, lower financial and digital literacy than men contribute to a scenario where choosing the right financial products is much harder than what it needs to be.
A successful investment regime is not just about meeting your savings targets and investing in a host of assets. An often neglected piece of the investment puzzle is being aware of the fact that your financial and risk-taking abilities as well as your goals and priorities will be an ever changing landscape. Your investment decisions should be in sync with the life stage you are in right now. For women this act of maneuvering can seem tricky because of them being at a disadvantaged position as opposed to the men in the financial management space.
Tanya Shekhar, a 32-year-old media professional narrates the entrenched idea among Indian women of considering “a man as a financial plan” deters many women from being proactive in managing their money. “I started saving and investing when I was 25. Like most young women, I was oblivious to the basics of personal finance because neither my family thought I would need those skills nor did the education system prepare us for it. A major problem that I faced in the early days of my investment journey was aligning my investment strategies with my changing life situations. At that time, I was under the illusion that once you have invested your money, you don’t need to tinker with it for a few years or till you achieve your goal. Learning that your portfolio has to be adjusted with a fair amount of regularity was a harrowing experience,” Shekhar narrates.
Shekhar recalls as a 25-year-old who was still savouring the taste of newly-acquired financial independence, she was content having invested in fixed deposits and a few randomly chosen mutual funds. “It is only when I took out a loan to buy a car at the age of 28 that I realised I need to overhaul my investment game. I became aware that I needed to segregate my investments depending on my goals and their respective timelines and that confining myself to traditional investment instruments wasn’t going to suffice if I had to meet my other goals while repaying my loan. Again, by the time I turned 31, my priorities had changed and so did my financial situation because I was married and was expecting a baby. I redrafted my investment strategies keeping in mind the possibility that I may have to take a career break when the baby would arrive and my income would be impacted,” she explains.
Career breaks due to motherhood or for looking after family members is common among women. However, choosing the right investment products and striking the optimum balance between risks and returns at different stages of life can be a riddle for many women. Also, given that most women have to juggle between household chores, work, childcare and even looking after the elderly in a relentless cycle on a daily basis, it is impossible for many female investors to find the time to brainstorm over their investments. As such, despite possessing high levels of financial literacy many women end up getting sucked into the cycle where they have to depend on male members for money management.
Preeti Zende of Apna Dhan Financial Services says, “Financial planning is a continuous process. We need to make necessary changes. For example, if you are a college student and have earnings through stipends or part time jobs or have created a body of savings from your own pocket money, you can invest for your short term goals. While long term goals may seem too far off or unclear, the biggest advantage at this age is that your risk-taking abilities will be high and you can be an aggressive investor.”
Investing according to the life stage you are in also entails a fair degree of learning and unlearning because lack of knowledge about asset classes and different financial products can make change seem too daunting. Urmila Singh of S9 Financial Planners says, “By virtue of being a woman in the financial planning space, I have had the chance to interact with women from different age groups and some of the most common questions I got was - how should I Invest and in what? Is equity risky for me? My answer to them would be any financial product you don't understand will anyway be risky to invest in, but if you know the product and invest wisely the chances of it being a bad move reduces significantly.”
Explaining the necessity of shifting investment strategies with age, Zende elaborates, “In your 30s, you may have extra responsibilities. For instance, investing for your child’s education may be a major goal for you. A combination of equity mutual funds in the form of a large cap or an index fund as well as flexi cap and some exposure in midcap funds along with some investments in fixed income instruments can be a wise move at that stage.”
Furthermore she advises that once you inch closer to your 40s, you should religiously abide by the principle of goal based investing. “While following the goal based investment strategy, focus closely on the asset allocation formula while constructing your portfolio. Once you get comfortable with equities you can gradually increase your exposure, especially for long term goals. Index funds, flexicaps, small exposure in mid caps and international funds can be a good combination,” she suggests.
- It is better to seek professional advice should you feel too overwhelmed by the task of reviewing and changing your investment mix regularly.
-Insurance will always play an indispensible role in ensuring your well-being and that of your loved ones. Checking whether you have adequate coverage from time to time is paramount in yourself prepared for any emergencies.
- Financial planning is a continuous process. We need to make necessary changes. For example, if you are a college student and have earnings through stipends or part time jobs or have created a body of savings from your own pocket money, you can invest for your short term goals.
- A combination of equity mutual funds in the form of a large cap or an index fund as well as flexi cap and some exposure in midcap funds along with some investments in fixed income instruments can be a wise move in 30s.
This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.