TomorrowMakers

As a woman, you have plenty of investment options to consider - from fixed deposits to mutual funds to gold schemes.

Is RD your go-to investment option These better alternatives deserve your attention too

Attractive interest rates, low investment threshold, and no obligation to make deposits at regular intervals make a recurring deposit the investment of choice for many women who save and squirrel away a little from their income every month. A recurring deposit account offers guaranteed returns from 5.5% to 8%, depending on the financial institution. 

A recurring deposit is undoubtedly a good investment avenue, but it has certain limitations and may not be ideal for all your financial objectives. Neither is it recommended that you put all your funds into a single instrument. For your diverse needs and goals as a woman, here are some add-on investment choices that you can consider.

Related: What Investment Options Can Create A Regular Income For Women?

Mutual funds

Mutual funds are fast gaining popularity as a long-term investment option. There are over 2500 mutual fund schemes, each with varying investment mandates. This gives you the flexibility to create different portfolios for different financial goals. You can make lump sum investments or small regular investments over the long term, via a Systematic Investment Plan or SIP. 

A SIP is similar to an RD, but the long-term returns can be significantly higher thanks to equity exposure and the power of compounding. For example, if you deposit Rs 10,000 every month into your recurring deposit account for 15 years, at 8% interest, your corpus will grow to Rs 34.6 lakh at the end of the period. A similar SIP in a large-cap equity mutual fund at an average return of 12% will grow to Rs 47.6 lakh!

A SIP approach also helps mitigate volatility and brings down your purchase cost via rupee cost averaging. Mutual funds can thus be a potent tool for meeting long-term goals such as retirement planning or saving for a child’s education. What’s more, mutual fund investments are extremely liquid; there are no penalties if you prematurely withdraw the investment in part or in full after the completion of a year.

Related: Important Things To Consider When Investing In A Mutual Fund

Unit Linked Insurance Plans 

ULIPs offer the dual benefit of earning market linked returns while simultaneously providing a life insurance cover (between 10x to 40x the premium amount). A part of the premium you pay goes towards the risk cover and balance is invested in a common investment pool. You have the liberty of selecting the fund (debt, equity or balanced) based on your investment goals and risk appetite. You can also switch between funds at no additional cost up to a specified number of times.

Some women centric ULIPs do allow for waiver and funding of premiums in case of certain events such as diagnosis of malignant cancer of female organs, pregnancy complications or death of spouse. 

Many ULIPs also offer a ‘capital guarantee’ that secures your primary investment corpus against market volatility. A ULIP is primarily an insurance product, hence the premiums paid can be claimed as a tax deduction under Section 80C. However ULIPs have a five year lock-in period, hence you should evaluate the investment basis your horizon.

Gold schemes

Women’s love for gold is well-known. Various gold-based investment schemes provide an opportunity to generate returns or use the precious metal for future jewellery needs, via a systematic investment route. Different gold-backed schemes work differently. 

For example, a Sovereign Gold Bond (SGB) scheme is a gold-backed investment in the digital form issued by the RBI. If you are looking to buy gold in the future, rather than speculate on the price, you can invest in a sovereign gold bond and redeem bonds for cash on maturity or sell it on the stock exchange at prevailing market rates. 

Gold ETFs (exchange-traded funds) work in a similar fashion, where the commodity-based traded fund invests in gold and its ancillary businesses. As opposed to a lump sum investment via a gold bond scheme, gold ETFs work just like any other mutual fund SIP, allowing you to make small investments over a period of time, which you can redeem to buy physical gold or jewellery at a later date.

Conversely, if you have idle gold jewellery, you could earn interest on it by investing in a gold monetisation scheme. It functions like a fixed deposit for your physical gold, where you earn an annual interest on your gold deposit. This relieves you of the hassle of storing the gold safely. On maturity, you have the option of taking the gold back or its cash value. 

Related: Look beyond gold jewellery and invest in these avenues instead

Last words

Women today have plenty of investment tools at their disposal. Technology-driven options give you complete control over your money. The important thing is to have a defined investment goal and select the right investment vehicle after carefully analysing your risk appetite and investment horizon. Do you know about these cost-effective investment options?