- Date : 04/10/2021
- Read: 4 mins
Women inculcate positive investing characteristics by following some simple guidelines. Owing to their better investment habits, women tend to earn better returns in a mutual funds portfolio when compared with men.
Investing advice often starts with the assumption that women want less control over their investments. However, research doesn’t agree with this. In fact, according to a recent study, women investors consistently outperform the markets.
Women tend to earn better returns in an investment portfolio of mutual funds when compared with men. And this is due to their investing habits. According to an investment report by ET Money, in each of the past four years ending 2020, women have earned at least 10% more returns vis-à-vis men.
Studies show that women spend more time researching their investment choices. Women are more likely to take on appropriate levels of risk with their investments, making up for better investing outcomes. The difference in the returns earned by women and men also revealed some distinct changes in the investment habits of both.
Women investors are continually sharpening their investment habits. They are gradually turning more and more savvy as far as finance is concerned. The financial behaviour of Indian women is changing, and they are slowly gaining a deeper understanding of investment, resulting in the success of women investors.
The reasons why investments by women earn greater returns than men
1. As per the ET Money report, women have taken better charge of their finances. They have developed an extraordinary understanding of investments. Their investing best practice of holding investments for the long term and staying calmer during market fluctuations grants them the ability to enhance their returns. Due to this, women are more likely to meet their investment goals.
2. Women are also more patient when it comes to doing Systematic Investment Plans (SIP) in mutual funds. They are more disciplined investors, stick to their SIPs, and are more regular in making SIP instalments compared to men.
3. Women are gaining confidence in their ability to invest. They are far more determined than men. Although men engage in trading more than women and are confident investors, they sometimes tend to be overconfident.
4. Mutual funds have emerged as the most preferred asset class for women. Women investors aged 18-25 years are likely to choose a high-risk, high-return asset class over traditional investment options, which offers better returns.
5. Women also score better in maximising tax benefits as they use tax-saving options more intelligently. With at least 15% of the total portfolio invested in ELSS funds (versus 12% by men), their returns turn out better. This has helped them combine tax savings with wealth creation, compared to 12% of men.
6. Women are more likely to have age-based asset allocation. So, they achieve proper diversification to help protect their money, irrespective of market conditions.
7. Their investment strategy also changes with age. Portfolios of women under 30 are largely equity-heavy. On the other hand, those above 50 have most of their funds invested in debt instruments. They have a deep understanding of the risk of each asset class. They also understand asset allocation to ensure an optimal risk-reward mix.
8. There is a rising trend of women from Tier 2 & 3 cities moving towards investing. Women across India have been joining the investment bandwagon. Jabalpur, Dehradun, Bhubaneshwar, and Mysore are some cities where more and more women investors are catching up on market investment.
When it comes to investing, women tend to educate themselves, devise a strategy, and adhere to it. Women investors are constantly honing their investing skills. Indian women's financial behaviour is evolving, and they are gradually developing a better grasp of investing, culminating in the success of female investors. With the winds of change and equality being the most pressing need of the hour, the time has come for women to take the lead and make independent investing decisions!