It is a known fact that women are good at savings and ideally they should excel in investments.
Their sense of self preservation and wariness will keep them away from poor investments while their instinct to fend for themselves makes them good risk managers. And investing is all about managing risk.
Once risk is managed effectively, returns will automatically follow. Hence, women should take more interest in investing household savings.
Risk is when there is a chance of losing capital. Investments such as stocks, real estate, gold, fixed deposits and bonds carry the risk of capital loss. Real estate is considered the riskiest followed by stocks, gold, bonds and fixed deposits.
Returns are always the highest from the riskiest assets and lowest from the least risky assets.
So when should you invest in the riskiest asset class —real estate and equities? When should you tap the least risky asset class — bonds and fixed deposits?
This will be determined by the extent of household savings or the excess cash flows over income that you have.
If a woman finds that after meeting all her expenses she still has a lot left in the bank, then she can afford to take risk and invest in realty or equities.
If the outlook for the future is good in the sense that they see working members of their family including themselves receiving pay hikes, promotions, better job offers etc then they can take more risks with their savings.
On the other hand, if household expenses are moving up and there is little left in the kitty to save, it is time to avoid risky assets.
This is because inflation is eating up into savings while household income is not matching up.
Higher inflation is not good for risky asset classes in the long run.
Women should trust their instincts when being approached by salesmen peddling investments.
You should avoid investments where you know that the salesman is only working for his commission.
Investments should make economic and financial sense for the household, not go to earn commissions for salesmen.
Women should not succumb to emotional pressures while investing because emotional investments do not make economic sense. So gear up and start investment while wishing you happy women’s day.