Editorial Team

Women are considered best managers but when it comes to managing money, they are often seen taking a back seat. But things are changing for good as more and more women are becoming financially independent. Women are coming forward and taking the lead in managing money and taking investment decisions. The number of women equity investors have gone up in the recent past. Data at ET Money is showing an encouraging trend. The number of ET Money women users have gone up from 10% in 2016 to 26% in 2021. So, here are a few investing tips for all those women investors who are entering the space of equity investing.

Understand yourself as an investor. The Aspirations of women are very unique. Your goal could be different from those of men, whether it is higher education, career advancement, marriage, dream honeymoon or even a maternity break a few years down the line. You may even need funds for independently starting your own dream start-up. So, before you start saving and investing for your goals and aspirations, you need to understand yourself as an investor which essentially defines your risk taking ability, your confidence level as well as your financial knowledge.  

You could be someone who likes to take slightly higher risk to earn that extra return while on the other hand, you could be someone who loses her sleep seeing the portfolio in red. Ideally, you should be investing in line with your personality. Different products come with different risk and return profiles. If you invest in a product, which carries more risk than you can manage, you are likely to take some hasty decisions which could harm your portfolio returns. During the market crash of March 2020, many investors rushed to redeem or sell their equity investments at loss as they were not ready for such volatility. As the market saw a sharp recovery post that correction, they missed out on the potential gains. Therefore, to avoid such decisions which could harm your portfolio returns, you should know your personality traits as an investor. If you want to know more about your investor personality, you can take the investor personality assessment by ET Money here. 

Define your goals clearly:   Have clarity of thought as far as your investments are concerned. Define your short, medium, and long term goals in terms of amount you need to accumulate. This will help you in deciding the right amount you need to invest regularly to achieve your goals. So, suppose your retirement goal is to accumulate Rs 1 crore in today’s value, considering inflation at the rate of 6%, you will need approximately Rs 5.74 crores for your retirement 30 years later.  

The following table shows you how much you need to invest monthly to achieve the goal.

Monthly investment needed for your goals retirement goal of Rs 5.74 crore after next 30 years 

Rate of Return8%10%12%15%
Required Monthly Investment (Rs)35,05722,68214,3857,043

So, clearly, we can see from the above table, higher the rate of return, lesser will be the investment required. It is difficult to earn a 10-15% return from any fixed income instrument while equities have the potential to deliver such returns. So, it’s important you invest in equities for your long term goals. 

Get your asset allocation right: Asset classes such as equity, gold, debt, real estate etc. perform differently over different time periods. One of the keys to successful investing is getting the asset allocation right that is investing in the right assets in the right proportion and at the right time. A right asset allocation helps you optimize your returns as each asset class has its own risk and return matrix. Therefore, you need to allocate money across different asset classes in line with your goals. The asset mix for a short goal will be different from that of a medium and long-term goal. So, suppose you are planning to take break from your career and take up higher studies in next 3 years, and your goal is to fund the cost of education, you should not be investing all your money in equities as investing in equities could be risky during short-term. Similarly, for a goal like retirement you can’t just rely on debt investments given the high rate of inflation, you may not be able to accumulate enough. 

Don’t ignore portfolio rebalancing:  You need to monitor your portfolio as no investment can fetch returns or performs the same way indefinitely. Returns from different asset classes vary from time to time, therefore you need to rebalance your portfolio periodically. Rebalancing means booking gains from asset classes which have done well (valuations are expensive) and investing in asset classes who are relatively cheaper or are yet to see their upcycle. You should decide a period like one month, six month or annual and do rebalancing regularly. You will also need to do rebalancing as and when you decide to put more money.

Investing is not a one time activity, its a continuous process. You need to devote time and effort as most of the investment products don’t offer personalized services where they tell you when, where and how much to invest. There are different investment products like mutual funds and ULIPs and NPS available which have their own defined objectives and you need to align your goals with them. 

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