It's Time For Women To Play A Larger Role In Money Management

Hemant Rustagi Chief Executive Officer, Wiseinvest Advisors

An online survey by Fidelity Investments showed that women invest and generate returns more than their male counterparts by 40 basis points. The study brings out the fact that women saved an annual average of 9 per cent of their pay checks, compared to an average of 8.6 per cent saved by their male counterparts. While men generated returns of 6 per cent on their financial investments, women saw their portfolio growing by 6.4 per cent. 

It is evident from the results of this survey that women are better savers and investors. Considering that every investor has to be a saver first, women have a natural edge here as they are savers by nature. Besides, women have all the traits required of a good investor for achieving investment success on a consistent basis like patience, perseverance and discipline. The key question, however, is whether the findings of the study apply to Indian women or not.

Although a large number of women in our country do not play an active role in their own and family's money management, it cannot be denied that they possess all those qualities that can make them successful investors. As we all know, women have been playing an important role in managing the household budgets efficiently for long time. More often than not, despite varying income levels, they manage to save money that is often used by the family to tackle financial emergencies. Therefore, it is time for them to move beyond their limited role of managing household budgets and play a bigger role in money management process of their families. 

While working women are more likely to participate actively in the money management process, homemakers – either by choice or by design–usually end up playing a limited role. However, the fact remains that women are well-suited to manage money and hence if they decide to and are given an opportunity to play a larger role in family's finances, their contribution can be immense in ensuring that there are sufficient resources available for different investment goals to be achieved over short, medium and long term. Let us analyze some of the qualities that make women better investors and how they can play bigger role in money management: 

Ability to plan and execute it well The manner in which women handle household budget and ensure that no member of the family has to compromise on any of their important needs proves that they can plan well and efficiently execute it too. One of the key factors that plays an important role in investment success is how an investor plans his/her investments and executes it through defined time horizon. 

Women are cautious- One of the classic investment mistakes is the tendency to follow aggressive investment strategies as it often takes investors beyond their risk-taking capacity. As a result, they often get disappointing results from their investments and that compels them to take some haphazard investment decisions relating to their asset allocation and choice of investment options. 

Needless to say, this puts their financial future at risk. Women are less likely to chase returns by taking disproportionate risk. While being overly cautious too can be negative for the health of the portfolio, women can overcome this as they gain more knowledge and experience. 

Women have more patience- Market linked products test the patience of investors from time to time. Therefore, only those investors who do not lose their patience due to short term volatility are more likely to achieve their true potential. Considering that women have the ability to think long-term, they are less likely to dump their asset allocation and well -designed investment strategies when faced with adverse market scenarios. This can give wonderful results in the long run. 

Women could be open to seek advice- While all those women who have not been actively involved in money management may not be quite familiar with how to deal with the vagaries of the markets and to analyse the impact of ever-changing economic scenario, they are more likely to seek help when needed, as compared to their male counterparts. It is a proven fact that a good advisor can make a huge difference to what an investor gets to keep at the end of one's defined time horizon.