Women and Investing

In the previous generations, a middle or upper income group urban woman going to work was seen more as matter of her personal choice rather than being driven by necessity. Now, more women choose to get married at a later age or remain single and therefore need to become financially independent. The number of single mothers is also rising; these women need to work to raise their kids. More and more married women are going to work so that the family can keep up with higher living expenses and improving lifestyles.

Even in families where women are not working, there is increasing involvement of women in personal finances of the household. This is a very encouraging development for the well being of families and our society as whole. However, we still have a long way to go as far as women involvement in investments is concerned. In the changing social conditions, it is very important for women to take an interest in financial education and start making financial decisions which ensures their and their families’ financial security and success in financial goals.

In our society there are several misconceptions about women and money. These misconceptions are largely a result of biases of a patriarchal society. These misconceptions have been perpetuated through several mediums and need to be corrected.

• Men are better savers than women. This is a wrong perception. A survey conducted by Bank of Baroda, shows that average balances of women in Jan Dhan Yojana is more than average balances of men (source: Times of India, August 2021). This shows that women can save more than men.
• Men are financially more prudent than women. Debt reduces your capacity to save since you have to pay interest on debt. It has been seen that men are likely to take on more debt compared to women (source: bankrate.com, November 2022). In most families, men usually make the big ticket purchases e.g. vehicles, properties etc; these purchases are financed by debt. Even if we compare an average middle income young single man with a young single woman, the man is likely to spend more on a vehicle e.g. the man buying a motorcycle and the woman buying a scooter. Higher cost means more debt and interest expense – less savings.
• Men are better investors than women. Studies in the US have shown women usually think more long term in investments, whereas men tend to short term investment decisions. Men trade much more than women; while women tend to make long term (buy and hold) investment decisions (source: Motley Fool, March 2023). This means men are likely to take more risks than women.
• Women are not interested in personal finance and investments. In a patriarchal, male dominated society, men are supposed to take care of money matters, while women take care of the family. With societal changes taking place in India e.g. shift from joint to nuclear families, women choosing to remain single, greater career growth opportunities for women, more and more women are seeking financial independence. Since the COVID-19 pandemic women are saving and investing more than men (source: Outlook India, November 2022).

Women are as capable as men, if not more in saving and investing. However, there are some common investing mistakes which women should avoid.

• Avoid debt as much as possible: As per RBI data, households debt rose by Rs 6 trillion in FY 2021-22 to Rs 83.65 trillion (source: RBI Bulletin, September 2022). While women in general have a cautious attitude towards debt, you should ensure that your spending does not exceed your income. You should avoid purchasing expensive items on EMI, since these schemes usually have interest costs associated with them. Interest payments will reduce your savings capacity.
• Be disciplined in your spending and saving: Make a list of your regular expenses e.g. food, rent, utilities, fuel etc and discretionary expenses e.g. clothes, accessories, dining out, entertainment etc. You should set yourself a monthly savings target and stick to it. You should be prepared to cut down on some discretionary expenses if required to increase your savings.
• Saving is not enough: You should invest your savings to create wealth for your long term financial goals. If you keep your savings in your savings bank account or park them in low interest rate fixed deposits, your post tax return may be lower than the inflation rate. Your post tax returns should be higher than the inflation rate (inflation adjusted returns) if you want to create wealth.
• Start investing through SIP: You may start investing from your regular savings through mutual fund systematic investment plan (SIP). Through SIP, you can invest fixed amounts every month (or any other interval). You can invest over long investment tenures and may benefit from the power of compounding.

The chart below shows the wealth through a monthly SIP of Rs 10,000 in Nifty 50 TRI over the last 20 years. With a cumulative investment of Rs 24 lakhs over 20 years, corpus of nearly Rs 1.1 crores (as on 31st March 2022).



^{For illustration purpose only}

The chart compares the growth of cumulative invested amount with the market value of investments over the period from 2003 to 2023. While the cumulative investment increases steadily over time, the market value experiences fluctuations reflecting changes in market conditions. Despite periods of volatility and temporary declines, including significant market corrections, the investment value demonstrates substantial long-term growth and significantly exceeds the total amount invested by the end of the period. The illustration highlights the benefits of disciplined, long-term investing and the power of compounding, showing how staying invested through market cycles can help create substantial wealth over time. It also reinforces the importance of patience and consistency in achieving long-term financial goals despite short-term market fluctuations.

Source: National Stock Exchange, Advisorkhoj Research. Period: 01.04.2003 to 31.03.2022. Disclaimer: Past performance may or may not be sustained in the future.

• Invest in your personal development: Most of the time, we get so involved in our work and social life that we do not find time for our personal development. Investing in your personal development is as important as investing in Bank FDs, mutual funds and shares. In the modern age, you need to up-skill yourself continuously to create career growth opportunities for yourself. You may enrol in a professional skills development or soft skills course. You may engage with a career coach, who can give unbiased guidance on development. If you invest in your personal development, you will progress in your career. With career growth, your income and savings will also increase.