How Can Women Start Their Investment Journey?

In this article, we will discuss

• The various investment options to be discussed are as follows
• Conclusion

Women are better savers as compared to men. However, when it comes to making investment decisions, they often tend to rely on others, especially men in their lives. This needs to change as making one’s own financial investment decisions is empowering to say the least and besides, there are enough examples to prove that women can be as good as, if not better than men at managing money.

If you are a homemaker or a working woman and want to start investing, start now. The first step is to choose the type of investment as there are multiple available options such as FD, stocks, mutual funds, PPF etc. It is better to understand each option before deciding. Therefore, in this article, we will discuss the various investment options in which women can invest, to begin with.

The Various Investment Options to be Discussed are as Follows:

1. Fixed Deposit
2. Recurring Deposit
3. Exchange Traded Fund (ETF)
4. Public Provident Fund (PPF)
5. Mutual Funds
6. Systematic Investment Plan (SIP)
7. ELSS
8. Index Funds
9. ULIPs
10. Direct Equity
11. Conclusion

Fixed Deposit

The simplest and most convenient form of investment is investing in a fixed deposit FD). They give returns in the range of 4 - 7%. It guarantees consistent interest rates in the range of 4-7%. Senior citizens are offered interest rates higher by 0.50% to 0.75% of the rates offered to the general public. There are various interest payment options and income tax deductions without any market-related risks. Based on the state of the economy the interest rates fluctuate based on the state of the economy. Banks fix interest rates based on RBI’s policy review. FD may be short-term or long-term. The duration might range from seven days to ten years.  You risk losing compound interest and paying penalties if you prematurely terminate your FD.

For opening an FD account, contact your bank and put in a request. You can do it online too, using the Internet or mobile banking. Then you can switch over to Systematic Investment Plans (SIPs).

Recurring Deposit

A Recurring Deposit, or (RD), is a term deposit that allows customers to invest fixed amount each month over a period of time and save money with ease. Recurring deposit accounts are offered by most banks and Non-Banking Financial Companies (NBFCs) in India with tenures ranging from minimum 12 months to maximum 120 months. Minimum deposit amount is Rs. 100/- per month. RD offers fixed interest payment on the invested amount at a specific frequency till the pre-determined term or up on maturity. At the end of the term, your invested capital along with remaining or accumulated interest is paid. This scheme aims to inculcate a regular habit of saving among the public. RD also offers the additional benefit of taking a loan against the deposit. About 80 to 90% of the deposit value can be given as a loan to the account holder. It varies from lender to lender.

EXCHANGE TRADED FUNDS (ETFS):

Exchange-traded funds, or ETFs, are a collection of various securities such as bonds, shares, money market instruments, etc., that tracks an underlying asset. They offer the best attributes of two financial assets – mutual funds and stocks.

Just like mutual funds, ETFs are a pooled investment vehicle that offers diversified investment into various asset classes like stocks, commodities, bonds, currencies, options, etc. Moreover, they can even be traded like stocks on the stock exchanges. They are essentially Index Funds that are listed and traded on exchanges like stocks that reflect the composition of an Index, like S&P CNX Nifty or BSE Sensex.

There are several ETFs available to suit the needs of almost all investors. These are Bond ETFs, Currency ETFs, Liquid ETFs, Gold ETFs, and Index ETFs.

Public

Provident Fund (PPF)

PPF provides a tax-free maturity value and a tax rebate on the annual amount invested under Section 80C. For example, If Rs. 1.5 lakhs per year is invested in PPF starting in 2023 at the current market rate of 7.1%; in 30 years it will become Rs. 1.5 crore.

Comparison of various tax-saving instruments

Investment	Taxable	Lock-in period	Returns
Bank Fixed Deposit	Yes	5 years	4-6%
Public Provident Fund (PPF)	No	15 years	7-8%
National Savings Certificate	Yes	5 years	7-8%
National Pension System (NPS)	Partially	Retirement	8-10%
ELSS Funds	Partially	3 years	15-18%

Mutual Fund

A mutual fund pools money from several people who desire to invest in money market assets, including government bonds, corporate bonds, stocks, commodities, and other things. Each mutual fund scheme invests in different stocks or shares, based on their financial goals. Each investor owns units, which represent a portion of their holdings of the fund. The income/gains generated from this collective investment are distributed proportionately amongst all the investors after deducting certain expenses, called Net Asset Value or NAV. Mutual funds enable one to invest in funds they may otherwise not be able to due to high investment costs. Mutual funds are managed by certified fund managers who invest in various financial instruments based on their own research of the companies or funds to invest in. This makes them safe investment options for beginners.

Which type of fund to invest in?

Decisions on which fund to invest in would be made based on the following:

• For long-term goals – such as retirement planning an Equity or balanced fund is a good option provided investors are willing to assume some risk)
• For a very short-term objective – such as a couple of months then a Liquid Fund would be ideal.
• For getting regular income - a Monthly Income Plan or an Income Fund would be the best option.

Systematic Investment Plans (SIP)

Mutual fund investment is for everyone and not just for large investors. With an amount as low as Rs 500 per month one can start investing in mutual funds. An individual only needs to have a Savings Bank (SB) account and with that account can start investing in Mutual Fund schemes. Mutual Funds promote the habit of regular investing. Systematic Investment Plans (SIP) offered by Mutual Funds are easily the best way to enter the world of investment by anyone.

Types for mutual fund to invest in for beginners:

ELSS mutual funds 

Working women can also start with ELSS, as it combines tax saving with retirement planning.

An ELSS fund or an equity-linked savings scheme is the only kind of mutual fund eligible for tax deductions under the provisions of Section 80C of the Income Tax Act, 1961. Tax rebates of up to Rs 1,50,000 can be claimed. This will help in saving up to Rs 46,800 a year in taxes. You can start by investing as little as Rs 500 every month in MFs using SIPs.

Almost 65% of ELSS mutual funds’ asset allocation is made towards equity and listed shares. They may have some exposure to fixed-income securities as well. ELSS has a lock-in period of just three years, the shortest among all Section 80C investments.

Index funds 

Index funds are based on an underlying index like NIFTY, SENSEX, etc. and just mirror the returns of that index. Legendary investor Warren Buffett highly recommends investing in Index funds for retail investors. This is the most cost-effective and passive way of investing in stocks, free from Fund Managers' biases. Index funds are great for beginners wanting to invest directly into equities but do not know which companies to invest in as it gives you an automated equity portfolio of top companies. Index funds are advisable only if you are looking for holding it for the long term of 5 years or more.

Besides, investing in large-cap equity funds, are also good for risk-averse investors. Mature women investors can also invest in mid-cap or multi-cap funds, with longer time frames.

ULIP Plans

ULIPs are one of the safest investment tools for beginners. ULIPs have a one-of-a-kind investing structure and a 5-year statutory lock-in term. They are a hybrid product that has the benefits of both insurance and stock market investing. Investors need to make monthly payments in two parts: the first half is used to pay for life insurance premiums, and the second is used to invest in financial instruments of your choice such as equity, debt, or balanced funds.

Investors can opt for long-term or short-term insurance duration. Additionally, ULIP offers tax benefits under Section 80C of the Income Tax Act of 1961.

Direct Equity

Direct equity is buying a company’s stock through a stock broker. This is the most powerful choice as an investment option for women who are beginning to invest in India. When you buy a company’s stock, you purchase a portion of the company’s equity. You make a direct investment in the company’s growth and journey. For direct investment in the equity market, one would require adequate time and market understanding to gain from their investment.

Some points to keep in mind:

• Know your risk appetite – Knowing how much risk an individual is willing to take is one of the main things required when trading in the equity market. As the company’s stock price fluctuates depending on several factors such as the company’s performance, government policies, global markets, etc one must be ready for a drop in one’s investment and should only invest as much as one can comfortably lose in the market.
• Invest in blue-chip companies – For beginners in the stock market, it is advisable to stick to blue-chip companies with large market capitalization as they are more stable than others. For investors who are new to the stock market, investing in such companies is a safe bet because there is a lower risk factor attached to such companies.
• Long-term approach – Investing for the long term is always a better option than trading for beginners in the stock market. A long-term investment period of say 5-10 years, will yield higher returns and also prevent you from knee-jerk decisions based on market volatility.

Trading in stock market

While investing is a long-term strategy to build wealth, trading is a short-term strategy to achieve the same. There are intra-day trades, swing trades, etc. In order to succeed in trading one must learn technical analysis of stocks. This will help to understand entry and exit strategies. Timing your entry and exit is very important in trading. Entry strategy means on what basis are you taking entry in a stock or any instrument that you trade. Secondly, you should have an exit strategy which again is to understand the basis of your exiting a stock.

Fundamental analysis – Along with technical analysis one must also understand the fundamentals of the stock market, such as how to read stock charts and analyze financial statements to identify market trends and make informed trading decisions.

Management – Management of money, risk, and stop loss are key to being a successful investor as it will prevent you from incurring a huge loss in one trade.

Professional traders use a combination of fundamental and technical analysis, as well as risk management techniques, to maximise their profits while minimising losses.  

Conclusion

Women should start investing as soon as possible to enjoy a greater level of financial freedom and achievement of their goals. It is also very important to think about the future and invest for the long term, which means that you should start investing early, in order to maximize the returns at the end of the tenure.

Investing in the stock market is a great way to build wealth and achieve financial freedom. However, the stock market has been a very male-dominated field. Empowering more women to invest in the stock market will not only narrow the existing gender gap prevalent in the industry but also create a more equitable and prosperous world for all.

A Demat account is required to hold your securities in electronic form. Therefore, in order to buy any stock, it is mandatory to open a Demat account as you will need a broker to execute your trades. Open a free demat account with Samco and start your trading journey now.

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