 "Women need to be more aggressive")
Working women have to often juggle multiple roles - of manager, mother, wife, daughter, etc. And amid all that, they have to ensure that they keep their financial independence as well.
So, how are a woman's finances any different from men's? Traditionally, we have followed the concept of stree-dhan, but fathers have managed their working daughters' money and after marriage, husbands have done so.
The one stark difference between men and women is that many women take a break in the middle of their careers due to childbirth. Even though companies give maternity leave, most women choose to take a year or two or even more to concentrate on the family before coming back to work.
Consequently, should women be more aggressive with their retirement planning? The answer is yes.
And saving in a bank account is not enough. Money saved and not invested implies erosion in value due to inflation. When the consumer price index is 8 per cent and the savings account rate is 4 per cent, the oft-used phrase 'my bank balance' has little meaning unless it is invested in fixed deposits earning better returns.
Typically, women generally make conservative investors compared to their male peers, with a strong preference for gold jewellery. Infants get their golden trinkets very early in life. The mother in the house pieces her savings over the years for her child's education, and then to build a collection of gold jewellery for her child's wedding. Often in doing so, investing for her own retirement takes the back seat.
Let's look at some investment options for women beginning with the current favourite: Gold. Several mutual funds houses today offer gold mutual funds or gold ETFs which for as little as Rs 1,000 per month allow investors the opportunity to own gold. This is similar to a share being traded in the stock market. But there is no physical gold involved, thereby eliminating the risk of theft.
Women can also consider blue-chip stocks for long-term investments. Since selection of stocks is not something easy for normal investors, it is best to leave this job to money managers such as mutual funds. Another favourite is fixed deposits. However, this route is taxable (30 per cent for the highest income tax bracket) on the income earned. An interesting option is liquid funds which are a smarter option where investors can earn around 10 per cent without any tax liability. Having systematic investment plans (SIPs) is also something strongly recommended for women. Again, for as little as Rs 1,000 a month, investors can use SIPs for long-term wealth creation through equity mutual fund schemes. Returns generated through mutual fund equity schemes (including direct equity) are exempted from tax incidence, if they are held for more than one year.
Of course, irrespective of gender demographics, it has been observed that most people in general wait to create a small corpus before investing the same. While spending money comes naturally to us, the fact that money may also be invested with the same frequency is something that is not often thought of.
Planning today so their savings can flourish into their retirement support may seem like a goal far into the future. For compounding to truly work, early investing really works - classic examples being the Employee Provident Fund or Public Provident Fund. In simple parlance, every penny counts. Savings, especially for retirement, should start early and continue throughout one's working lifetime in a disciplined manner.
Today's career woman may have many more roles to play. She may support herself, her parents or children as well. In recent times, concepts such as inheritance to the girl-child, and succession planning are critical, yet lesser known. Of course, managing money hasn't been the easiest of tasks in the past five years. Even though the Bombay Stock Exchange Sensitive Index, or Sensex, is at an all-time high of 22,000 points, there are many stocks even within the index which haven't really done too well.
During this time, even the best fund manager found it hard to buy stocks or even raise enough money to buy stocks as retail investors chose to sell at every high and cut losses. No wonder, most concentrated on containing losses rather than trying to boost their portfolios. There's a lesson for investors too from this: There can be long periods of no action or subdued action in equities. But that does not mean you should shy away from them or change your portfolio dramatically.
If you are uncomfortable, don't allocate fresh funds to equities. The writer is CEO, Radical Trading & Financial Services
START EARLY TO BUILD A LARGE CORPUS
| Savings : Don't save what is left after spending; spend what is left after saving to take care of your future needs.
| Investment : Don't put all the money in one basket; diversify, including buying into gold and real estate.
| Apart from savings, carefully planned protection is also a must - being part of a will, insurance protection, etc.
| Risk Taking: Carefully assess everything before jumping. Avoid impulsive decisions.
| Create an earnings stream to avoid dependence on a single income stream.
So, how are a woman's finances any different from men's? Traditionally, we have followed the concept of stree-dhan, but fathers have managed their working daughters' money and after marriage, husbands have done so.
The one stark difference between men and women is that many women take a break in the middle of their careers due to childbirth. Even though companies give maternity leave, most women choose to take a year or two or even more to concentrate on the family before coming back to work.
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This interruption implies that they have fewer years to save for their retirement. Their approach towards retirement is often haphazard. In the United States, for example, only 45 per cent of women participate in retirement planning. Therefore, it is important to focus on continuous savings systematically so as to safeguard your future needs.
Consequently, should women be more aggressive with their retirement planning? The answer is yes.
And saving in a bank account is not enough. Money saved and not invested implies erosion in value due to inflation. When the consumer price index is 8 per cent and the savings account rate is 4 per cent, the oft-used phrase 'my bank balance' has little meaning unless it is invested in fixed deposits earning better returns.
Typically, women generally make conservative investors compared to their male peers, with a strong preference for gold jewellery. Infants get their golden trinkets very early in life. The mother in the house pieces her savings over the years for her child's education, and then to build a collection of gold jewellery for her child's wedding. Often in doing so, investing for her own retirement takes the back seat.
Let's look at some investment options for women beginning with the current favourite: Gold. Several mutual funds houses today offer gold mutual funds or gold ETFs which for as little as Rs 1,000 per month allow investors the opportunity to own gold. This is similar to a share being traded in the stock market. But there is no physical gold involved, thereby eliminating the risk of theft.
Women can also consider blue-chip stocks for long-term investments. Since selection of stocks is not something easy for normal investors, it is best to leave this job to money managers such as mutual funds. Another favourite is fixed deposits. However, this route is taxable (30 per cent for the highest income tax bracket) on the income earned. An interesting option is liquid funds which are a smarter option where investors can earn around 10 per cent without any tax liability. Having systematic investment plans (SIPs) is also something strongly recommended for women. Again, for as little as Rs 1,000 a month, investors can use SIPs for long-term wealth creation through equity mutual fund schemes. Returns generated through mutual fund equity schemes (including direct equity) are exempted from tax incidence, if they are held for more than one year.
Of course, irrespective of gender demographics, it has been observed that most people in general wait to create a small corpus before investing the same. While spending money comes naturally to us, the fact that money may also be invested with the same frequency is something that is not often thought of.
Planning today so their savings can flourish into their retirement support may seem like a goal far into the future. For compounding to truly work, early investing really works - classic examples being the Employee Provident Fund or Public Provident Fund. In simple parlance, every penny counts. Savings, especially for retirement, should start early and continue throughout one's working lifetime in a disciplined manner.
Today's career woman may have many more roles to play. She may support herself, her parents or children as well. In recent times, concepts such as inheritance to the girl-child, and succession planning are critical, yet lesser known. Of course, managing money hasn't been the easiest of tasks in the past five years. Even though the Bombay Stock Exchange Sensitive Index, or Sensex, is at an all-time high of 22,000 points, there are many stocks even within the index which haven't really done too well.
During this time, even the best fund manager found it hard to buy stocks or even raise enough money to buy stocks as retail investors chose to sell at every high and cut losses. No wonder, most concentrated on containing losses rather than trying to boost their portfolios. There's a lesson for investors too from this: There can be long periods of no action or subdued action in equities. But that does not mean you should shy away from them or change your portfolio dramatically.
If you are uncomfortable, don't allocate fresh funds to equities. The writer is CEO, Radical Trading & Financial Services
START EARLY TO BUILD A LARGE CORPUS
| Savings : Don't save what is left after spending; spend what is left after saving to take care of your future needs.
| Investment : Don't put all the money in one basket; diversify, including buying into gold and real estate.
| Apart from savings, carefully planned protection is also a must - being part of a will, insurance protection, etc.
| Risk Taking: Carefully assess everything before jumping. Avoid impulsive decisions.
| Create an earnings stream to avoid dependence on a single income stream.