- Date : 23/12/2019
- Read: 4 mins
Is being overcautious a reckless move when it comes to financial investments – and if so, are women more prone to such behaviour?
Women tend to be naturally more cautious and risk-averse than men. They prefer safer avenues over those that seem like uncharted waters or hold some risk. This caution is seen even in their ways of saving and investing. But are these ‘safe’ investments costing women dearly? Let’s decide after looking at some of their preferred investment choices.
1. Safe investment choices
Investment choices commonly made by women are fixed deposit (FD) in banks and Public Provident Fund (PPF). These are guaranteed investments that are unlikely to ever be in jeopardy. They earn a fixed rate of interest every year. Interest earned on bank FD is taxable whereas interest earned on PPF is tax-free.
As both of these investments are low-risk or no-risk, they are perceived to be smart investment decisions. But are they really?
2. Savings vs. investment
Savings are when you put aside money in anticipation of future requirements; they are a safety net for unforeseen expenses. Your savings must be accessible and safe; by definition they would need to be put in places where they would not be in any risk.
Investments, on the other hand, involve well-planned and thought-out decisions that can bring you maximum returns on the invested amount. Mutual funds and equities are investment avenues that offer good returns but carry different levels of risk. This is why FD and PPF are considered to be more like savings rather than investments.
As long as it is a planned decision to save, you would be fine putting your money in such low-risk avenues, but if you want to really make your money work, they are not the best choices.
Related: Investing and the power of compounding
3. A change of mindset
Women have recently gained greater importance in the workplace; many of them are now in positions that earn decent salaries. However, the safety of their hard-earned income is always on their mind and often makes them invest from the heart rather than the head.
Some well-planned investments can provide the necessary encouragement; seeing the results would surely create a change in mindset and give women the ability to take calculated risks in investments and generate much higher earnings. Once the ability to sift through and create a good investment portfolio is attained, your financial freedom is guaranteed.
4. Why investing is important
Once you have a certain basic amount saved up, you must invest it. Or you won’t unlock the potential of your hard-earned money to generate further income. By keeping their money in low-return avenues, women suffer an opportunity cost – the cost of lost opportunity and what it means for their earnings. Well-planned investments can give you a good return on your income without incurring too much risk.
Related: 6 Books for women to learn the art of investing
How to take better investment decisions
Women can take better investment decisions in a few simple ways. Let’s look at some of them:
◾ Approach a trusted financial consultant for advice.
◾ Study the top ten performing mutual funds with a good track record and slowly take the first steps towards investing in them.
◾ Learn to book profits – that is, once your investments have generated a certain income, sell your portfolio and reinvest afresh.
◾ Ask and follow advice from others on the investments they have made, but do some research yourself before making any decisions.
It is financially reckless to put away large sums of money in avenues that generate minimal returns. Even if it is caution that prompts women to be so circumspect, it definitely makes them ‘recklessly cautious’ with their money. So, turn your investing practices on their head! To understand the stock market and make better investment decisions, take a look at how to invest in stocks like a pro.
Women tend to be naturally more cautious and risk-averse than men. They prefer safer avenues over those that seem like uncharted waters or hold some risk. This caution is seen even in their ways of saving and investing. But are these ‘safe’ investments costing women dearly? Let’s decide after looking at some of their preferred investment choices.
1. Safe investment choices
Investment choices commonly made by women are fixed deposit (FD) in banks and Public Provident Fund (PPF). These are guaranteed investments that are unlikely to ever be in jeopardy. They earn a fixed rate of interest every year. Interest earned on bank FD is taxable whereas interest earned on PPF is tax-free.
As both of these investments are low-risk or no-risk, they are perceived to be smart investment decisions. But are they really?
2. Savings vs. investment
Savings are when you put aside money in anticipation of future requirements; they are a safety net for unforeseen expenses. Your savings must be accessible and safe; by definition they would need to be put in places where they would not be in any risk.
Investments, on the other hand, involve well-planned and thought-out decisions that can bring you maximum returns on the invested amount. Mutual funds and equities are investment avenues that offer good returns but carry different levels of risk. This is why FD and PPF are considered to be more like savings rather than investments.
As long as it is a planned decision to save, you would be fine putting your money in such low-risk avenues, but if you want to really make your money work, they are not the best choices.
Related: Investing and the power of compounding
3. A change of mindset
Women have recently gained greater importance in the workplace; many of them are now in positions that earn decent salaries. However, the safety of their hard-earned income is always on their mind and often makes them invest from the heart rather than the head.
Some well-planned investments can provide the necessary encouragement; seeing the results would surely create a change in mindset and give women the ability to take calculated risks in investments and generate much higher earnings. Once the ability to sift through and create a good investment portfolio is attained, your financial freedom is guaranteed.
4. Why investing is important
Once you have a certain basic amount saved up, you must invest it. Or you won’t unlock the potential of your hard-earned money to generate further income. By keeping their money in low-return avenues, women suffer an opportunity cost – the cost of lost opportunity and what it means for their earnings. Well-planned investments can give you a good return on your income without incurring too much risk.
Related: 6 Books for women to learn the art of investing
How to take better investment decisions
Women can take better investment decisions in a few simple ways. Let’s look at some of them:
◾ Approach a trusted financial consultant for advice.
◾ Study the top ten performing mutual funds with a good track record and slowly take the first steps towards investing in them.
◾ Learn to book profits – that is, once your investments have generated a certain income, sell your portfolio and reinvest afresh.
◾ Ask and follow advice from others on the investments they have made, but do some research yourself before making any decisions.
It is financially reckless to put away large sums of money in avenues that generate minimal returns. Even if it is caution that prompts women to be so circumspect, it definitely makes them ‘recklessly cautious’ with their money. So, turn your investing practices on their head! To understand the stock market and make better investment decisions, take a look at how to invest in stocks like a pro.
