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Women must take charge of their investments

This article appeared in Outlook Money India

Women in India on average outlive men by at least four years. This also means nine out of ten women will be the sole financial decision-makers in their households at some point owing to life events. However, although women are better savers than men, they have not yet fully embraced the world of investing. As Kathy Murphy, Head of Personal Investing at Fidelity has said, “Women work pretty hard in their lives and at work. They want to have a better life and fuel their dreams. So, they should get the money to work hard for them as well.” Although women represent 53 per cent of undergraduate degrees and a whopping 69.6 per cent of M.Phil degrees in India, labor force participation is a mere 20 per cent and women making investment decisions is at a much smaller rate.

The pandemic has only compounded the situation. A recent Fidelity study of women in the US after one year of the pandemic shows that 79 per cent are feeling more weighed down by job and money stress, up from 67 per cent last fall. Some of the greatest stressors include saving for retirement and other long-term goals, balancing work and caregiving responsibilities, and managing daily expenses. The good news is that women have begun to appreciate the criticality of wealth management even more, as the pandemic has usurped our stable lives.

Women need to take charge of their investments to achieve financial and life goals. Here are some measures I would recommend.

  1. Prioritise wealth management: Although women are better savers than men, they often do not take the next step into investing and largely stick to savings, which are neutral at best or can even result in money loss due to inflation. The key is to prioritize financial education and wealth management as much as family and health. Money may not provide happiness, but it does offer the freedom to pursue happiness goals and reduce friction in life. Carve out time each week to focus on finances, working with family, friends, and the external ecosystem. In a few months, the overall comfort of life will most likely improve with an increased sense of being in control.

  2. Break the intimidation cycle: Investing may seem hard because of all the jargon such as alpha, beta, and quant. The good news is there are a plethora of online and offline options to begin the learning journey. Today, every bank in the country is keen to engage on an investing journey. It is good to set a learning path and meet people you are comfortable with, to learn about market choices. Use online tools or the services of a financial advisor to build a financial plan. It will provide long-term clarity on milestones needed to meet goals. Most importantly, it will provide an anchor for a woman and her stakeholders (spouse if married or extended family) to a plan that all can commit to.

  3. Stay focused: In a survey conducted by BCG, women were found to regard wealth as a tool for attaining specific goals, and not as a goal itself. That is a good start, and the key is to take a long-term view of one’s needs. Sometimes, market players will entice investors with higher-risk profile investments and perhaps lofty return promises. But the key here is to ensure focus on personal goals, the risk profile that works best, and measured steps that are desired. When Fidelity analyzed eight million clients, we found that investments by women earned higher returns by a percentage point than men. Women balance risk-return trade offs better than men. No wonder that in 2020, women-managed mutual funds outperformed men-managed funds by 2 per cent in the US. So, play to your strengths.

  4. Live a full life: Wealth management is just one of the tools to attain goals. It’s easy to get carried away by the vagaries of the markets and increase stress or anxiety. This is a long-term play. A market is a weighing machine over the long term and a voting machine in the short term. Set a strategy for goals, re-evaluate an investment approach just once a year or less, set reasonable expectations, and be patient.

Investing, although a gender-neutral topic, has been the domain of men in India for the longest time but can and should be one of the key pillars of growth for women. The digitization of the economy and the rapid adoption of mobile-friendly technologies has made it much easier to step into investing, irrespective of financial status or position. All it takes is a resolve to get started and the time is now!

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