For most homemakers, financial exposure is limited to handling the household budget and managing monthly expenses. In fact, working women too confine themselves to budgeting, leaving investment mostly to the men in their lives. Starting any type of investment can indeed be a daunting prospect, especially if one lacks any knowledge about investment instruments and the process of doing it. So how do women begin their investment journey?
Firstly, understand why you want to start investing. Are you doing it to achieve the family’s financial goals and share your spouse’s financial burden? Or, perhaps, you want to invest to secure your own financial future? It could simply be an attempt to gainfully deploy the money that belongs to you and is lying idle. Understanding the purpose of investment is important because it will help define the time period for investing and the return that you are seeking, which, in turn, will decide the instruments in which you should put your money.
The first step to begin any type of investing is, of course, to know about the instruments, how they function, their benefits and drawbacks, how these are taxed, and which instrument is suited to what time period. You can learn about these instruments either online, through personal finance websites or publications, or even talk to financial planners and experts. Do not invest in the first instrument that is recommended to you by a colleague or relative. In fact, it’s best to avoid friends or family members who have no expertise in the subject because it could lead to financial loss and complicate your relationship.
Broadly, there are two types of instruments: debt and equity. While debt instruments, be it bonds, fixed deposits, PPF, VPF, or government schemes, are designed to keep your capital safe, the equity instruments like stocks or mutual funds are linked to the market and entail risk. You could also invest in gold or real estate, depending on various factors. An important point to remember is the time horizon of your financial goal and your requirement of funds. Some instruments are illiquid, implying that your money will get locked in for a fixed period, as in fixed deposits, or you may not be able to sell the asset, such as a house, when you need the money. The next crucial consideration is the rate of return that you want because each instrument will offer a pre-determined or a market-linked rate of return.
While the low-risk options, such as FDs or PPF, will have a low rate, the high-risk options, such as equity funds, will offer a higher rate of 10-12%. So depending on how much corpus you want to create and the time horizon available to you, you can choose an appropriate instrument. Once you have a working knowledge of the instruments, start by putting in a small amount in an instrument and watch its performance. If you just want to explore first, you could put in a little money in different instruments and watch how these perform. When you gain confidence and know how each one works, choose an instrument that suits your needs and work towards your goals.
It’s important to constantly learn about investing and improve your financial literacy. Gradually, learn about the role of insurance in protecting your finances, and the way tax can eat into your returns, as both these will impact your investments. More importantly, don’t just read. Take action as soon as you are ready.
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All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at firstname.lastname@example.org with ‘Wealth Whines’ as the subject.
Disclaimer: The advice in this column is not from a licensed healthcare professional and should not be construed as psychological counselling, therapy or medical advice. ET Wealth and the writer will not be responsible for the outcome of the suggestions made in the column.