These portfolio strategies can help woman stay on a solid financial footing while ensuring you ride choppy waters with ease and address key life goals with ease.
Women have come a long way. Breaking patriarchal barriers, they have scripted stupendous success stories everywhere for all to see. However, the once-in-a-century pandemic has impacted women in more than one way, with many bearing the brunt of losing income and rising domestic work burden.
In such a scenario, women need to craft robust portfolio strategies that help them ride volatility and address crucial goals.
Arm Yourself with the Right Knowledge
The journey to crafting an all-weather portfolio kicks off with the proper knowledge. It is the shining armour in your knight that helps you understand, decode, and navigate the world of investment. It helps you better understand a financial instrument, understand its working mechanism, the associated risks and gauge if it aligns with your financial goal.
Knowledge also gives the confidence to make investment decisions independently and mitigate the threat of falling prey to mis-selling, rumours, and biases, all of which can hamper long-term wealth creation and impinge crucial life goals. You can find several avenues to bolster your financial literacy in the digital age.
While ample information is available over the web, many institutions have come up with initiatives targeted towards financially empowering women – for example the Blue Bindi Project by Edelweiss Wealth Management is an initiative to empower women financially has received a great response. By being a part of such initiatives, it will help you to understand your financial needs and know how to achieve them.
Opening up a wealth of opportunities, you can easily enrol yourself in such projects to widen your horizon and embark on your journey towards financial freedom. You get to interact with financial experts who will help you better analyse your monetary situation and make decisions accordingly.
Start Investing Early
Women, on most occasions, take a sabbatical for family commitments. The period could range from a few months to years. Hence, it’s essential to start investing early to make up for the lost time and give money more time to grow with compounding coming into play. The ideal time is to begin investing upon receiving the first paycheque in inflation-beating instruments such as equity mutual funds via systematic investment plans (SIPs).
SIPs bring discipline into investment and help maintain discipline. Even a modest SIP of Rs. 1,000 in an equity fund offering annualised returns of 12% for 15 years can help garner a corpus of Rs 5 lakh. Topping it up by 10% can further inflate the final corpus.
Buy Life Insurance
Life insurance is the cornerstone of a financial plan, and a term life plan helps fulfil the income void in case of any untoward incident. With a term plan, you can give a robust protection net to your dependents and loved ones in case of your absence. The simplest among all life insurance policies, a term plan offers a payout equivalent to the sum insured either as a lump sum or in a staggered manner.
On the other hand, buying unit-linked insurance plans (ULIPs) helps invest in capital markets and build a corpus for life goals such as children’s higher education and retirement. In ULIPs, one portion of the premium provides life cover while the other is invested in underlying securities as per your choice.
New-age ULIPs are more transparent in terms of pricing and management. ULIPs offer partial withdrawal after the mandatory lock-in period of 5 years that comes in handy to overcome liquidity crunch. Compare different life insurance products and choose the one that best fits your requirements.
Save up for Emergencies
Rainy days can hit anytime and derail even the soundest of financial plans. Covid-19 has shown how things can turn topsy-turvy in a matter of weeks and stretch for an extended period. Being emergency-ready ensures you don’t have to dip into your savings and compromise on key commitments. Build a contingency fund equivalent to at least a year’s expense factoring in your existing debts and liabilities.
Make sure the corpus is readily accessible. Therefore, you must invest in instruments that can be readily converted into cash, such as liquid funds. Liquid funds invest in underlying securities maturing in 91 days, and the proceeds, upon redemption, are credited into your account within 24 hours on business days.
You can also invest in bank fixed deposits as these too are quite liquid. If you break before maturity, you need to pay a nominal fee as a penalty. Keep in mind the safety aspect of capital while building the emergency fund. Don’t chase returns while building this all-important fund.
Secure Your Sunset Years
While juggling between personal and professional commitments, don’t ignore your retirement. Securing your sunset years ensures you live life on your terms. Start planning for it at the earliest as retirement is a long-term goal. Factor in inflation while calculating the retirement corpus. You can bank on the National Pension System (NPS) to accumulate funds for retirement. You can choose funds based on your risk tolerance.
Upon turning 60, you can withdraw a certain amount as a lump sum while using the remaining to buy an annuity to receive pension. NPS rules have been relaxed, making it a lucrative investment option to secure retirement. You can also invest in equities to build a sizeable corpus. Make sure to shift to debt as you close in your goal to prevent capital erosion due to market volatility.
Review Portfolio Periodically
It’s essential to review your portfolio periodically and make the desired changes. Requirements change with time, and hence, it’s crucial to analyse your portfolio to ensure it aligns with your needs. Tinker drastically after taking professional advice.
These portfolio strategies can help you, as a woman, to stay on a solid financial footing while ensuring you ride choppy waters with ease and address key life goals with ease.
(By Rahul Jain, President & Head – Personal Finance, Edelweiss Wealth Management)