Friday, March 8, 2013

'S' for Shopping or Saving?

While the whole world is celebrating the International Woman's Day today, you should not miss out this opportunity to express gratitude towards all the women in your life, you could give them flowers or ornaments but how about going a step further? You could look forward to empower the women around in your life by guiding them towards financial security.

Generally the first thing that a woman who has spare cash will think of is 'Shopping', but when it comes to 'Savings' or financial planning, women seem to take the back seat. Today we see a large number of women venturing out and working alongside the male in almost every profession. They are not just independent, but also capable enough to make themselves financially secure. But many a times we see that they pass on the responsibility of financial planning to their father, brother or husband. So it's your responsibility to create awareness of financial planning amongst the women around you and educate them on money management and investments.

Below are some investment avenues where women can look to park their money:

Ensure Insurance: Insurance is first & vital step in any financial plan. Life insurance is necessary for every working woman. It will give financial protection to their dependents in case the worst occurs.
Note: Insurance should be taken for financial risk protection only not for Investment or Tax planning.

SIP by SIP: Every investor, be it a man or a woman should focus on investing on a regular basis. Systematic Investment Plans (SIP's) will enable you to invest small amounts through Mutual funds in periodic installments. The SIP mode is a good investment option for working women; it will also encourage house wives to invest their monthly savings.

Axe the Tax: Tax saving scheme is also an investment option for women. Tax-saving is meant to be done keeping your financial goals in mind and not just to save a few pennies. While National Savings Certificate (NSC) and Public Provident Fund (PPF) are good tax-saving instruments, tax-saving mutual fund schemes (ELSS - Equity Linked Savings Schemes) are also options to look out for as well.

Bank on Banks: Fixed/Recurring Deposits are also options for women to grow money slowly but steadily. If they have a decent sum of money, they can go for a fixed deposit but if they want to invest a small amount every month, a recurring deposit is also an option.

Hold the Gold: For most Indians, gold is more than just an investment. Especially women, as they love to own exquisite jewellery. From an investment perspective, we would recommend you opt for gold ETF’s rather than physical gold. Apart from the fact that in case of physical gold there is danger of theft, other advantages of owning gold ETF’s are:
1. Reasonable: You can buy gold in small proportions

2.    Pure: Backed by real gold of high quality

3.    Convenient: You don't have to worry about its security

4.    Value: Trades like a normal equity share on the exchange - in tandem with domestic gold price

Different AMC's also provide investment options via SIP in Gold funds.

While the above options are a bunch of different investment avenues from different asset classes, it is also important to diversify the corpus across a few of these investment options and create a balanced portfolio.

Thumb rule for asset allocation - 'Don't put all your eggs in one basket'.

In other words, rather than putting all their money at one place, spread it across different asset classes, to reap maximum benefit and balance out the risk factor. A sensible asset allocation decision will align the assets according to the needs of the women in your family. It is strategic as it looks into the foreseeable future and builds the allocation bearing the risk, return and liquidity needs in mind.

Nevertheless asset allocation can be decided by measuring risk that is involved with each asset class. Therefore before women take their investment decision they need to consider both aspects of risk - their risk appetite and the risk level of the investment options being considered.
An appropriate risk allocation, along with overall total risk and return targets, should be thought of as the blueprint of diversifying portfolio risk, while asset classes are the bricks and mortar used to execute the design.

Click here to measure and calculate a suggested asset allocation and savings required.

Moreover, as she takes her first step towards making herself financially secure, you could just stand by her side, support her financial dreams and you will see her bloom as a confident, independent financial pro who can make choices beyond grocery lists, handbags and beauty products. Who knows, she may even show her gratitude by helping you meet your financial dreams too.
Source : QED

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