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Nurture the investor in you

The author urges women to discover their investing skills
Representational image.
Representational image.

Viraj Nanda   |   Published 08.03.21, 02:05 AM

The world is full of exemplary performances and accolades for women in every field they have set foot in. However, when it comes to investing and managing finances, research has shown that women keep more than 70 per cent of their assets in cash. This is, however, fast changing and a taxpayer platform in the country revealed that women are investing 12.7 per cent more than their male counterparts. Research by Merrill Lynch shows that 41 per cent of women are more inclined to invest now compared to earlier.

Why invest?

Financial independence and security mean being able to pay for the way you want to live without having to work till the end of your life or rely on others for it. In other words, it means being free and self-reliant.
Financial stability: As a woman, it is important to achieve a sense of financial independence. The gender pay gap, the pink tax and many other prejudices have historically created a discrepancy between the financial situation of women and men. Investing is, therefore, one of the best ways to ensure that one is as financially secure as their male counterparts. It is important to have the financial security to be able to walk away from situations that are toxic.

Money goals: Whether it is a plan to go back to school or that emergency fund for your parents, sending your kids to college, or just be able to take that dream vacation or a sabbatical you want, investing is one of the best ways to accumulate and grow wealth to reach those short term and long-term goals.

Famous talk host Joan Rivers  once said: “People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made.” So have you got your key made yet?

Start early

There is never a “right time” to start investing as it is almost impossible to time the market. Therefore, when thinking about investments from a long-term perspective, one must invest frequently and consistently. As Doris P. Meister once said: “Take a measured risk.”

Save more, earn better

Research shows that despite the common perception that men make better investors, the opposite might be true.

Fidelity Investments analysed over 8 million client accounts and found that women tend to outperform men in terms of generating a return on their investments. And this might be driven by traits that some people view as being inherently female.

Women plan their investments from a long-term perspective with financial goals in mind rather than focusing only on performance, which ensures that they hold stocks from a long-term perspective rather than trying to time the market and generate higher returns by buying and selling during market fluctuations.
Women are more patient investors and don’t trade too frequently.

On an average, they traded 35 per cent less compared with their male counterparts.

Women take on less risk when it comes to investments, which ensures appropriate asset allocation and diversification, leading to more stability and better financial outcomes.

Women are more likely to ask for help when it comes to investing and managing finances.

Surveys revealed that 60 per cent of men think that their knowledge of investments and the stock market is foolproof.

And women asked questions and sought professional advice 45 per cent more than men.

Invest right

When building a portfolio, a framework helps make the right decisions.

Identify your goals: The starting point of every investment decision should be identifying the underlying goal behind investing. If you are focused on securing a steady stream of income for the future or saving for your children’s education, your investment decisions will differ.

Allocate well: The second step in creating the right mix of investment categories such as stocks, bonds, and cash. This reduces the risk of loss and increases the chances of higher returns on investments.

Diversify: Diversification across assets, sectors, and geographies helps in reducing the risk of losses. Investing in international markets helps diversify the portfolio.

Rebalance your portfolio periodically: With changes in the way the market moves, holdings in the portfolio are likely to perform differently. It is, therefore, important to revisit the target allocation and rebalance the portfolio to re-align it with your investment goals.

Evaluate new goals: It is important to periodically redefine your financial goals as your situation in life changes, and accordingly review your portfolio.

John Bogle, an American investor and philanthropist once said: “Don’t look for the needle in the haystack. Just buy the haystack.”

Global options

If you are looking to build a diversified portfolio, you could consider the US markets. With a broad choice of ETFs and index funds available, you can easily take exposure to the broader equity markets that are historically less volatile. Here some tips for investing in US markets:

Buy the world’s most innovative companies and participate in the growth of global leaders like Apple, Amazon, Microsoft, and Tesla. Buy companies you use and love like Starbucks, Nike, Estee Lauder and Disney.

Invest in emerging themes like artificial intelligence, clean energy, and biotech which are not available in India.

Protect your portfolio from a decrease in the value of the rupee vs the dollar.

Save in US dollars for overseas expenses such as children’s education, travel, and medical expenses.

Once you are ready to invest in the US market, open a US brokerage account. Doing so is a relatively straightforward online process.

Transfer the funds from your bank account to your US brokerage account.

Identify the investments you want to make. You can either do the research yourself or rely on guidance that is available in the form of recommended ETFs and curated portfolios.

This women’s day foster the investor in you and take the first steps towards financial independence.

The writer is chief executive and co-founder of Globalise, a platform for guided global investing.

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