The Ultimate Investment Guide for Women

Updated on January 20, 20157 mins read

Most women are conditioned to be more ‘adjusting’ in nature rather than being financially astute. Women usually are the ones to take a sabbatical/ change their job to tend to children or parents. They may earn less than their spouse due to various reasons even though they may be more employable and are more conservative by nature when investing.

‘Don’t worry honey, it isn’t your cup of tea.’

Your father/ boyfriend/ husband may have sometime in the past, said those words to you in response to your inquiries regarding investment avenues. You may have got angry. You thought the comment was unfair. You may have wanted to prove them wrong. But the truth is you have never gone beyond depositing some money in a FD every year.

With changing times, you need to change. Women, whether single or married need to understand financial planning and the execution in order to preserve their hard-earned money for the future.  You can always learn to invest smart.

Why should you invest?

If you feel that matters of finance are too complicated to understand, you should remind yourself that:

  • Finance is important. Men as well as women of all ages must spend time and effort towards financial planning.
  • Women have instinctively managed finances at home within given resources for centuries
  • Finance is NOT mathematics and is not complicated.  It uses logic and is quite simple.
  • Women tend to outlive men and may need to fend for their family alone for many years

How should you plan your investments?

You have accepted that you need to invest and are capable of doing so. You also acknowledge that your nature is different and you may invest differently. Now you need to make a financial plan keeping in mind these factors:

  • You could ask a reputed financial advisor to help you out.
  • You need to look at what you earn, how much you spend and how much can be invested. Collate all the information in one place.
  • You can also look at the investments made by your spouse or parents and make complementary investments.
  • For the needs of income tax and for practical reasons too, it is best the woman invests in her own name.
  • Nominating someone for each investment is highly recommended.

What are the safest avenues for investment?

Investments can be made in in lump sums or systematic monthly installments. Depending on your requirements and financial goals, you can invest in the following avenues:

A] TAX SAVING INVESTMENTS

The routes to investing:

  1. Investments under Section 80C can save you up to 1.5 lakhs in Income Tax.
  2. Aggregate interest earned on savings account with a bank up to Rs.10,000 are tax free
  3. Interest paid on education loan for self/dependents provides tax break under section 80E
  4. Housing loan for self occupied or let out property under section 80C, 24,80EE gives a substantial break
  5. Medi-claim, medical insurance, medical expenses for self/dependents can give tax benefits under sections 80D, 80DDB,80DD,80U
  6. Consider taking benefits of HRA (living in a rented home) under section 80GG
  7. Donations & charity could give some respite under section 80G
  8. Deduction for income from royalty on patent or books under Sections 80RRB and 80QQB
  9. Individuals earning less than Rs.12,00,000 a year can also avail deduction for equity investments Rajiv Gandhi Equity Savings scheme under section 80CCG

Points to consider:

  1. To begin with, you should ideally invest in avenues that provide some tax respite if your income is anywhere above Rs.2,50,000.
  2. Tax slabs for men and women in every age bracket are now the same.

 Many a times, it makes sense to fund certain financial goals through loans, even if there is a corpus of money you have saved up.

B] INSURANCE

Once you start earning an income, it is necessary to cover financial risk. Therefore, you can start by investing in 3 important insurance areas.

The routes to investing:

  1. Life insurance
    • To cover all liabilities/loans
    • To cover financial needs of your dependents – child/parents/spouse
  2. Vehicle insurance where relevant
  3. Medical insurance or medi-claim
    • To cover medical expenses
    • To cover loss of income on case of medical problems

Points to consider:

Insurance is essential and expensive. It commands due consideration.
It is not as complicated as it seems. Follow some basic guidelines to select a good policy best suited to you.

  1. Understand financial risks to be covered in case of your disability/illness/death.
    • Separate the most essential needs from luxury/additional needs and prioritize
    • Understand the duration to each of the goals
  2. Make a list of features of various policies and compare against your needs
  3. Evaluate the policies based on
    • Traditional (Non market linked plans) or Unit linked plans
    • Past performance
    • Guaranteed payout (obtain documents from the company and read the fine print)
    • Fund manager – if unit linked plan
    • Available information on the policy settlement history of the company– disputes/news etc
  4. Obtain information from insurance companies on schemes available
  5. Don’t restrict your research to women oriented plans
  6. Traditional and ULIP Schemes can broadly as:
    • Term policies – low cost schemes providing only risk cover
    • Child plans – policies with payout scheduled at intervals to suit children’s educational needs
    • Endowment plans – Expensive plans but can be used to plan scheduled payouts for later years
    • Whole Life insurance – most expensive of all insurance schemes, but provides payouts to family for life
  7. Women oriented features are provided in some schemes
    • Premium holiday for 3 years in case of pregnancy related complications
    • Cover and premium holiday in case of birth of child with congenital disabilities
    • Payout and premium holiday on diagnosis of cancer of female organs or the death of a spouse.

Since insurance comes at high costs, it may be best to separate insurance decisions from investment decisions. More flexibility, higher sum assured, added features, additional riders all come at added cost.

Consider taking a term policy with sum assured that would cover all of your loans. Add one whole life insurance or endowment plan to the list and one medical insurance policy to cover yourself and the family.

C] RETIREMENT FUNDING

Retirement in today’s times could refer to retirement from a job that earns a steady income. You may want to venture on your own after some years of employment. You may also want to take a sabbatical to care for your child or elders at home. For this, you need to create a cushion of funds.

If you foresee a retirement far in your future, you could be more flexible with your investments. Closer the retirement, more secure your investments need to be.

The routes to investing:

  1. PPF
  2. Pension plans – private or Government
  3. Long term deposits
  4. Some part through Immovable property

Points to consider:

  1. You would find, by not disturbing the employee provident fund (EPF) you are building a steady corpus of funds which is growing at a guaranteed and high return.
  2. However, if you wish to retire early, it may be useful to invest in a pension scheme that provides annuity (annual income). Premiums for such plans can be paid for 5,10 or 15 years. The payout will be made to you annually for a duration selected.
  3. Some investors select an investment in land, house property or gold as a plan towards retirement. India may continue to deliver high returns despite short term volatility. However, you must consider a few aspects:
  • Immovable property may be hard to sell at desired cost in case of urgent need of funds
  • While well established builders may be offering over priced properties, smaller builders may have low resale value
  • Land investment may be more affordable, but it does not earn any regular income
  • With land investments, there is also the concern of illegal ownerships or land poaching
  • Gold may have emotional/traditional sentiments attached to it, hence may be hard to sell

It is recommended to liquidate investments 1-2 years prior to the year of financial needs. For example, if you wish to send a child to study abroad, you may want to sell an allocated piece of land 1-2 years before the planned year and invest the proceeds in more liquid and safe investment like a fixed depositor debt mutual funds for the 2 years.

D] EQUITY & DEBT

After investing in insurance and a retirement plan, the balance can be invested in avenues like the equity market, debt market, Government securities etc. These names only refer to investments you are already aware of.

The routes to investing:

  1. Investments in shares directly – you would need to educate yourself and monitor regularly
  2. Investments in shares or debt through mutual funds – would require less monitoring, but due diligence is necessary at the time of investment

Points to consider:

  1. Simplicity is perhaps a good thing, when it comes to selecting an investment product.
  2. ‘Fill it, shut it, forget it’ is not the best policy.
  3. High returns come at the cost of high risk
  4. All equity is not risky
  5. Frequent churning of portfolio adds to the cost, so be sure of your target while investing
  6. After due research select good mutual funds or shares and invest for a long term
  7. Debt investments do not always indicate guaranteed returns, but they do indicate certain safety of the funds.
  8. Asset allocation must be planned and adhered to at all times

Weather earning more or less – being an earning member of the society gives an individual a sense of independence. The income and independence must be cherished and preserved.

More men may have been historically inclined towards the stock markets and new fancy investment products. However, that does not take away from the fact that women have been managing home and families on limited resources for centuries. Women need to understand personal financial matters to manage alone or to contribute to the decision making process in the family.

No more excuses. Start investing!


Suma Ganesh

Suma Ganesh

Suma is an MBA in Finance and Marketing from ICFAI, Bangalore. She worked as an investment advisor to retail and high networth clients for nearly 7 years at Allegro Capital Advisors Pvt Ltd. This gave her a first hand understanding of the needs of an individual customer. With this edge, she moved on to Adi FinShiksha Pvt Ltd, where she trained financial advisors to manage their clients' investments and financial needs. With deep understanding of customers and their advisors, Suma then moved on to writing content in the space of personal finance. she is currently working as part of the content creation team at SwitchME, addressing the needs of home buyers and home loan borrowers.
0 COMMENTS

Have a question? Post it here and we will get back to you within 1 working day.