4 Advice for women to achieve financial independence

While the concept of financial independence has gained traction of late thanks to innovative campaigns undertaken by regulators and institutions, it seems a far-fetched dream for women. A study shows that only 33 percent of women make their own investment decisions against 64 percent of men.

Despite the fact that women possess several traits that make them better savers and prudent investors, the low numbers are a testament that they still depend on their male counterparts — husband, father, brother — when it comes to money matters.

With a little planning and encouragement, women can not only gain financial independence but also lend valuable advice to their family members regarding various aspects of investments. So, how can you, as a woman, do so? Let’s find out.

Start Early into Equities

The very concept of financial independence calls for having enough to address present and future expenses without depending on anyone. To do so, it’s essential to start early and begin investments in inflation-beating asset classes such as equities.

While the equity-market has been topsy-turvy in the past year — jumping to record lows to scaling new highs within months — numbers prove that they have triumphed over other asset classes. The 10-year CAGR of the Sensex has been over 10 percent, significantly higher than other asset classes.

Starting early also helps gain from the power of compounding, a disciplined investor’s best friend. You can venture into equities through either stocks or mutual funds. If you possess enough knowledge about markets, can track their movement, and read the finer details, investing in direct stocks is advisable.

If not, mutual funds can do the job for you with a professional fund manager taking care of your investments. To harness the power of compounding and stay for the long haul to make optimum gains, a systematic investment plan (SIP) is the ideal vehicle.

SIPs not only bring discipline into investment but also allows you to spend more time in the market rather than timing it. A SIP of Rs 5,000 in an equity fund offering annualised return of 10 percent for 20 years can help you amass a corpus close to Rs 38 lakhs. If you top-it up by Rs 500 every year, the corpus will balloon over Rs 62 lakhs.

Arm Yourself with Financial Knowledge

You can make prudent money decisions only when you have the requisite knowledge under your belt. While markets have ample financial instruments, each product is different in structure. Your learnings would help you make the right choice for yourself.

Today, there’s ample material available over the web reading which can help you understand the fine details. Many financial institutions, including brokerage houses, provide online classes that can help you dig deep about various financial instruments and their working mechanism.

These learnings can help you make the right moves and prevent your family members from making rash and flawed decisions. Also, you can protect yourself from falling prey to mis-spelling and invest in products that align with your goals and risk appetite.

Build a Sizeable Retirement Corpus

An essential aspect of financial independence is to have enough in your twilight years so as to not depend on your children for every small or big need. It’s a fallacy that retirement planning is just for men. Whether you are working or not, you need to invest and build a sizeable retirement corpus.

Since retirement is a long-term goal, you need to plan early and invest in equities to counter the effects of inflation. What’s crucial is to keep invested for the long haul to give your money more time to grow. While SIPs in mutual funds is an ideal bet, the National Pension System (NPS) is another vehicle that you can opt for to build your retirement kitty.

Not only does NPS provide equity exposure, but wafer-thin fund management charges ensure expenses don’t eat into profits. Upon turning 60, you can withdraw 60 percent of the corpus tax-free while using the remaining 40 percent to buy an annuity plan for the pension.

Active Involvement in Monetary Matters

Active participation in monetary matters would help know your family’s assets and the investments made in your name, among others. In case of any untoward incident, you can utilise this knowledge to sail through the crisis and ensure your rights are intact. In the case of joint investments with your spouse, always read the fine print to avoid surprises.

The Final Word

As evident, getting the basics right and an early start towards investment into equities can help you embark on your journey towards financial independence. Happy investing.