Raksha Bandhan: Celebrating the Rakhi of financial protection

Raksha Bandhan, the ceremony that profusely epitomises the emotional quotient of a brother-sister bond, is perhaps the most opportune time for all women to work towards securing their financial freedom. The great news is that even the first baby step towards financial freedom paves the way for a big leap forward, given the resolve and resilience that women are blessed with inherently. No wonder, the feminine power is deeply revered in Indian culture as the embodiment of three deities: Saraswati representing knowledge and wisdom, Lakshmi ruling wealth and prosperity, and Durga granting protection and stability.

In the context of investments, these divine attributes are of crucial significance. Hence, women should take the lead in financial planning and investment management, which call for actionable knowledge and wisdom in creating substantial wealth while ensuring its sustainability. Today’s women are super achievers, whether as professionals or homemakers, and they now play a far greater role in matters of earning and spending. It is only logical that they should be equally active on the saving and investing front too.

It is heartening to note the growing number of women investors in recent times, driven by the pandemic-enforced need of better avenues for beating inflation and creating wealth. Consequently, the popularity of bank deposits, as also the lure of gold, has diminished considerably. According to media reports, leading online brokerages are seeing more and more first-time women investors from cities of tier-1 and below joining the equity bandwagon, comprising close to 70% of the new accounts opened in the April to June quarter of 2020. It is pertinent to note that almost half of the women clients are housewives, which is indicative of the evolving nature of stock market investor profiles in India.

For those sisters who are yet to begin their tryst with investments, as also those who wish to enhance their knowledge and experience, here’s a concise Raksha Bandhan guide to quickly put key points in perspective.

Save for a rainy day

In this era of perpetual uncertainty and near-fatal disruptions like Covid-19, emergency funds have become more significant than ever before. You can arrive at the exact amount to be set aside per month after taking stock of your earnings and expenses, and debt like loan EMIs and credit card dues. You must ensure the liquidity of the emergency fund to enable fast withdrawals as and when required. So, a fixed deposit with near-term lock-ins can be a good solution which will also earn you interest on the parked funds, without compromising on liquidity.

Get the shield of insurance

Life insurance is necessary protection for you and your family. Given life’s unpredictability, it is important that you ensure the well-being of your near and dear ones though two forms of insurance — life and health. The former protects you from the vagaries of life, and the latter prevents unwarranted expenditure in the event of a medical emergency. What quantum and scheme of insurance you buy depends on your financial position and the assessment of your risks in life. Seek professional advice if required.

Adopt a goal-based approach to investing

After you arrive at the investible funds in line with your current net worth and after considering your emergency fund needs, it is important to establish the key reasons for beginning your investment voyage. This implies defining your life goals, short-term and long-term, which in turn would define your investment goals. Goals reflect your identity – whether as a homemaker, student, salaried professional, small biz owner, startup founder, entrepreneur – and risk profile – whether conservative, aggressive, stability-focused, growth focused, or an advocate of a blended approach.

This homework will help define the equity investments based on:

— Investment Focus: like Growth, Income, Value, Cyclical, Small cap, Mid cap, large cap

— Investment Avenues: like direct stocks, Portfolio investing, Mutual Funds (MFs), Exchange Traded Funds (ETFs) and other avenues like Fixed income instruments, currency, crypto, real estate, or gold

— Investment avenues like Nifty, BSE, international exchanges and the like

Ride the power of equity

Since investments are meant to grow your money substantially and sustainably over time, you need to invest in equity markets which help beat inflation and create long-term wealth. When you own stocks of fundamentally good companies, you become their part-owners and benefit from their growth and profitability. To offset the volatility inherent in equity, equity MFs and ETFs can be supplemented by fixed-income instruments like FDs, PPF, ULIPs, and Bonds. This blend of debt and equity will combine growth and stability for you. Talking of MFs, a Systematic Investment Plan (SIP) is a prudent solution to make the most of mutual funds, without staking large amounts at one go while reaping the benefits of rupee cost averaging.

Engage a financial advisor

Good investing opportunities abound both during bull and bear market phases. A good financial advisor can help you with disciplined long term investments based on fundamentally strong theme buys. Prudent investment is more elusive than what the term signifies. It is about putting equity and debt in proper perspective, before exploiting the intrinsic virtues of both asset classes. A competent advisor studies your life goals, as also approaching milestones like higher education, employment, entrepreneurship, wedlock, childbirth, vacation, or children’s education, before recommending appropriate investment options. A good advisor helps you with disciplined and diversified purchases in line with income profiles and risk appetites, making the most of tax incentives and market opportunities. Good advice is also about explaining intricacies, like for instance the pros and cons of load vs no load mutual funds, and lumpsum and SIP investments, as also making the client aware of the perils of excessive caution and greed and the fluidity of market cycles, including sharp upswings and falls.

Here’s wishing all our sisters and their near and dear ones a happy investment joyride. Let the holy trinity of divinity — Saraswati, Lakshmi and Durga — bless you with a financial freedom that you can relish and cherish in full measure.

(The writer is Head – Sales & Dealing at Yes Securities. Views expressed are personal)