27/04/2017 9:31 AM IST | Updated 27/04/2017 9:41 AM IST

8 Things Every Woman Should Do To Realise Her Financial Goals

Women save. Now the movement is to help them invest to grow.

ferrantraite via Getty Images

International Working Women's day was first celebrated in 1909 in New York. A century or so later we now celebrate "Women's Day". Face creams, lingerie, soft toys, chocolates and flower arrangements do brisk business; WhatsApp groups abound in tacky memes and gifs with men obligatorily wishing the women folk, and the women frothily thanking everyone who will listen.

But how many of us are aware that India's woman workforce is just 27% of the entire working population (global average is 50%). Among these, 63% are listed as "helpers" on farms and a mere 1% in sectors other than agriculture. The International Labour Organisation states that in the last decade India has seen a steep 10% drop in the woman workforce (largely farm helpers). The flip side to this statistic is heartwarming since the drop is largely attributed to sustained efforts by government and private forces to getting girls back into schools and keeping them there.

Women tend to undersell and underestimate both their levels of knowledge and the potential of their investment. Men tend to overestimate both.

Within the next decade, a resurgent and educated woman workforce will probably flow into the services and manufacturing sectors even as agrarian activities get more mechanised. Larger numbers of better educated women (YoY females entering formal education and topping board exams have been on a rise) will begin earning before they are married. The path-breaking Pradhan Mantri Jan Dhan Yojana has single-handedly increased single bank accounts by women from a mere 48% in 2014 to 61% in 2015. Several studies in South Africa and Kenya have shown that when financial savings instruments are managed by women, there is a disproportionate increase in health investments as well as household assets. This portends the winds of change likely to blow across India as more women are included and empowered.

It's a myth that women cannot be financially independent, or are unable to plan, invest, grow and save their money. To begin with, women have traditionally managed housekeeping money, salting away small amounts monthly, building up a secret corpus to dip into during "emergencies". Women save. Now the movement is to help them invest to grow.

Fundamentally a man tends to accumulate, a woman tends to preserve and grow. Men invest with more confidence while women are more focused on goals and objectives than on transactions. Men trade more; women are more stable though both end up largely in the same place. It's not about ability or competence. Women tend to undersell and underestimate both their levels of knowledge and the potential of their investment. Men tend to overestimate both.

In fact there is empirical evidence that women are probably better investors.

  • A study by Vanguard, a fund house, looked at investment portfolios of over 2.7 million accounts between 2007 and 2009; just at the peak of the financial crisis. Men in the study were found to be 10% more likely to cash out at a loss than women.
  • A 2001 study, "Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment," found that men traded stocks 45% more often than women. Extra trading reduced men's net returns by 2.65%/annum, while women's net returns dropped only 1.72%

Do not keep idle cash (except emergency funds) lying in a bank account/FD or in the locker in your cupboard.

Why? Men are self-directed. They want to do it on their own because they believe that they are knowledgeable. Ever succeeded in getting a man to ask for directions while driving? You know what I'm talking about. Women start out by saying, "I'd like some advice," because they believe they lack the requisite knowledge, even though knowledge levels may actually be comparable. In fact the ability to ask for help/advice is a woman's greatest strength. This, coupled with the maturity to stay the course regardless of the investment volatility, creates a more stable portfolio under a woman's watchful eye.

At some point in their lives—whether they are single, married, working, not working, divorced or widowed—women must charge of their money, making sure it grows and serves them as well their families. So, where to begin?

1. Take count today

What do you stand now—your assets, your savings, your income, your investments and your expenses? Neatly bucket these and build from there. What do you want to grow—assets or investments? Or do you want to rein in expenses to increase savings?

2. Set short-term goals

Along with setting the long term goals, don't forget to list the short-term goals as well. I am clear that while I'm saving for a longer life (inflation adjusted), I am not going to forget to live and enjoy my present—the little indulgences, travels, technology toys, home improvements etc.

3. Be disciplined and consistent in your approach

Consider automated investing ala SIPs, ULIPs that are tailored to your risk appetite. Let the experts grow your money. Or adopt a structured and affordable approach—for example, every month buy ten shares of an identified Blue Chip.

4. Diversify your investments

Ensure you have both liquid and illiquid assets/investments. This secures you from volatile economic cycles. Options are aplenty—real estate, bullion, equity, mutual funds, insurance, debt/bonds; link it to your overall strategy defined in point 1.

5. Make your money work

Do not keep idle cash (except emergency funds) lying in a bank account/FD or in the locker in your cupboard. Paper doesn't grow, inflation ensures it depreciates.

6. Do your homework

Review, research, read up on your investments, go through your consolidated reports, ASK questions of your advisor and keep your eyes and ears open for opportunities that you may want to tap

7. Know the risks

If you're making a risky investment, be mentally prepared to lose. At Edelweiss, our constant refrain is always, "Is it worth it? Can we afford it?" I use this in my personal capacity as well.

8. Evaluate your 'worth'

Sit back once a year (I normally do this on my birthday) and reflect on what you were worth five years ago and what you'll be worth five years later. Tweak accordingly. To remain focused on where you want to go, you need to look back on the experiences and learnings of the past.

I cannot resist ending without several pertinent quotes from Warren Buffett, the world's best-known value investor.

"No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant."

"Do not save what is left after spending, but spend what is left after saving."

Now let's begin.

Photo gallery 17 Fatty Foods To Eat On Fat Tuesday See Gallery