You may be earning enough money to survive, even to shop to your heart’s content, every month. But unless you are investing your money instead of just spending it, there may come a time when you won’t have a cushion to fall back on. Life if full of twists and turns, as the COVID-19 pandemic and ensuing lockdowns, health emergencies and hospitalisation costs, loss of jobs and stagnation, have recently proved. Having enough assets–— or at least an emergency fund— to fall back on is a necessity that you perhaps understand very clearly now.
But, how do you even start building assets? Where should you invest your money? Is it even safe to invest your hard-earned savings given the way the markets fluctuate?
Getting the confidence to investAsking these questions may be a good place to start, but many women often tend to not go down this path all the way to actually start investing. Why? The reasons are many, and at their root is the gendered stereotyping of women as being unable to handle money and money matters as well as men. This stereotype is represented not only in the gender pay gap and opportunities for women, but also in the financial sector itself – which continues to be dominated by men despite many women in India and all over the world making it to the top echelons of the industry.
However, studies tend to show that women are actually better investors than women. A 2015 study, titled ‘A study on the impact of investment experience, gender, and level of education on overconfidence and self-attribution bias’, by researchers at the Indian Institute of Management, Bengaluru, showed that men have a stronger tendency to be overconfident than women. The study indicates that men tend to have investor’s overconfidence, trade more voraciously, take more risks, and therefore run the risk of not getting enough returns.
This study, and many others, also show that when women do invest, they tend to be more cautious, have better foresight, and are therefore more likely to be better investors than men. So, if you want to invest your money and watch it grow, don’t be bogged down by the stereotype, and get the one thing that will provide you with financial independence and returns: financial literacy.
Why and how to invest right nowWhen you get down right to it, you are likely to find many avenues to invest your money to get fixed returns annually. These include the following options for first-time investors:
• Savings accounts, which provide low returns, but high liquidity so that your savings can be withdrawn whenever you need funds.
• Public provident funds, which have a low liquidity due to longer locking periods, but ensure returns that are good enough.
• Fixed deposits, where you can choose shorter investment periods, but the interest rates may vary depending on the state of the economy and the bank.
• Recurring deposits, where you can save a set amount every month and get good returns by the end of the year.
• Mutual funds, which you can invest in for a pre-defined locking period and accrue returns while saving on your taxes.
This apart, if you have the know-how, you could also venture into stocks with proper guidance. The returns on stocks, however, may not be guaranteed and are subject to market risks, which is why many don’t think of it as a safe investment option.
Which investment options you want to go with ultimately depends on you, but you may want to keep a few things in mind. We talked to Dipika Jaikishan, the co-founder and COO of Basis — an app that powers financial independence for women through bite-sized financial knowledge boosters, advisory tools and a vibrant women-only community – and she recommends the following investment tips that you must follow.
Get your money’s worthCalculating your money goes beyond what we all think. It is not just about deducting your expenses from your income, and voila! A heap of money in the form of savings will magically appear! Think about more than that. Your money needs to make money for you. If you want to reach a particular financial goal, how much will you have to save? For how long? What is the percentage growth on the type of investment you’re choosing? These are some good questions to get started with.
Don’t let your finances control youIf you don’t plan according to your income, you will end up overspending or spending on unnecessary things. And believe us when we say there’s never enough money in the world. Whether you are earning ₹20,000 or ₹2,00,000 a month, without systematic financial planning, it can all blow up in a puff of smoke. With a proper financial plan, you will be able to manage your income effectively.
Get expert adviceThis actually helps. Whether it is a session with an expert advisor, or attending workshops to help you understand money better, each step is one in the right direction. By voicing your concerns and talking about your goals with a professional, you will be able to get into the right mindset of investing systematically in the instruments that will help you grow. What’s even more important is having access to an expert at your fingertips, since all great financial decisions are about good timing.
Budget, spend and save. Notice something wrong?Most of us get this order wrong. It should, in fact, be budgeting, saving and then spending. A personal financial plan gets you into that groove. Tailoring a personal financial plan according to your needs can help you demystify this process of budgeting properly so that you maintain a balance of savings and expenses, and also raise your standard of living. But remember, living a better life doesn’t necessarily mean living a more lavish one. Just having that peace of mind thanks to a nest egg or cushion can help you go a long way.
You need to look out for your familyWe all want to provide for our family, especially during volatile times. That’s what contingency plans and investments are for. Whether it is your peace of mind emergency fund, retirement fund or career break fund, just making sure that you’re covered in the event of an emergency is a good place to start. This also means investing in good insurance policies. And make sure your emergency funds are easily accessible, since the home or car you own can’t be your emergency fund (converting it into cash can take a long time).