Two strategies to help women invest better in equities

Making investments has become easier than ever, but making investment choices has become harder than ever.

Till a decade ago, investing required paperwork and intermediaries. Today, anyone can open an account in minutes, automate SIPs, track markets in real time and access thousands of funds and products from a phone. But decision-making has become more challenging with so many different products and schemes, especially where equities are concerned. Not surprising, with over 7,500 listed stocks, over 10 equity mutual fund categories and over 2,500 mutual fund schemes in India — analysing between these options is a task further made difficult with so much content and opinions on social media.

Investors are no longer excluded, they are overwhelmed, especially women. Not much has changed over the years, where women’s financial literacy is concerned. They largely remain dependent on someone (family member/ friend/ colleagues/ social media) for investment advice. Often, they are unsure about the soundness of this advice. As with men, women
investors are prone to trend-chasing, short-term focus and being unsettled by volatility. All of these factors lead to indecision and hold women back from investing in equities.

The age-old advice would be to choose simple funds like index funds or flexicap funds, but in reality, performance-chasing and volatility leads to churn even in these funds. This is where balanced advantage funds can play a big role. These funds invest in stocks and bonds, and adjust the allocation based upon market conditions. Rather than depending on timing calls, these funds use a systematic approach, that shifts towards bonds in overheated markets and adds equity when valuations are attractive. Through tactical allocation between equity and debt in periods of volatility or elevated valuations, the fund aims to limit downside risk. By moderating the impact of sharp corrections, the strategy helps investors remain invested for the long term, through market cycles.

Multi-asset funds have gained popularity over the last few years due to good returns, mainly driven by the allocation to gold and silver in the portfolios. Balanced advantage funds would be preferred over these funds from an equity perspective due to higher allocation to equities and the fact that women already have high exposure to physical gold and silver.

Within the balanced advantage fund category, each scheme follows its own model and it is advisable to choose a fund with higher equity allocation, as debt allocation is already met with other investments like fixed deposits and insurance plans. Women investors should also note that balanced advantage fund returns will be lower than regular equity funds due to the debt allocation and regular risk balancing. If an investor can stay invested through cycles, pure equity funds are more likely to deliver better long-term returns than balanced advantage funds. Thus the choice really is between a steady, but lower returning investment or a more volatile, higher returning investment. Women must choose the one which aligns better with their risk tolerance and temperament.

Increasing the investment in a structed manner through an annual step-up can enhance the portfolio corpus drastically. A monthly SIP of Rs 25,000 for 15 years in equities, will grow to Rs 1.19 crore, assuming 12% p.a. returns. Increasing this monthly SIP amount by 10% annually, will yield a corpus of Rs 2.07 crore. Women investors who are confused about equity investing, can follow these simple strategies to ensure long term wealth creation.
Happy Women’s Day!