Women's Day Special: How to inflation-proof your investments?

Women are known to be avid money savers.  According to a survey by Scripbox, nearly 60 per cent women save more than 20 per cent of their income every month, of whom 16 per cent save a whopping over 50 per cent of their monthly income. However, most women continue to be less risk tolerant with 56 per cent preferring fixed income products such as bank fixed deposits (FDs), PPF, LIC policies and other tax saving schemes. It is a great regret if women who try hard to save a penny extra every month, cannot put their savings to earn inflation beating returns.

"Even as the bank FDs look risk-free, the taxation of interest and rate of inflation over the years can eat up your returns. Therefore, at times the actual return from fixed income products could be zero or negative," says Palka Chopra, Senior Vice President, Master Capital Services.

Mutual fund advisors recommend women investors to follow the principles of asset allocation, invest with specific goals in mind and add equities to their portfolio to beat inflation.

"While fixed income assets are a good starting point, most long-term goals, such as retirement, need allocation to an inflation-beating asset class, i.e., equities. Overall, any robust portfolio must be built on the principles of asset allocation, and equities are a very important part of it," says Prableen Bajpai, Founder, FinFix Research & Analytics.

This leads to the big question: where should one invest in equities? Well, for beginners, it's always advisable to invest via mutual funds on a monthly basis through systematic investment plan (SIP). The minimum time horizon to invest in equities is five to seven years. The category of fund depends on the risk appetite and time to reach the goal. Mutual fund advisors believe tax saving equity funds are a great start for the working women.

"The selection is always based on her financial needs. ELSS fund can be the first equity scheme for a female investor. It helps the investor to save tax as well," says Palka Chopra, Senior Vice President, Master Capital Services.

An ELSS scheme can invest across market cap as per the discretion of the fund manager and comes with a lock-in period of three years.

Non-working women or those who do not need tax savings, may go for large cap mutual funds to start their investment journey with equities. Large cap mutual funds invest at least 80 per cent of the portfolio in large cap companies. Large cap companies, as defined by SEBI, are the top 100 companies in terms of market capitalisation.

"Women entering this segment for the first time should take the systematic investment route into two categories - one being the large cap space which can be invested into via a combination of large cap fund and a nifty index fund. The second type of funds which can be considered are from the dynamic asset allocation category. These funds typically move between debt and equity based on market conditions and variables such as price-to-earnings, price-to-book, and momentum indicators," says Bajpai.

Investing in large cap mutual funds has an added advantage. Even women who are not much familiar with the capital market will be able to relate to the portfolio of the large cap mutual funds.

"They would be aware of most of the stocks/companies in the large cap mutual fund portfolio. Every woman must have at some point in time used some or the other product from these large cap companies. In a way, they would be able to relate with their investments," says Shweta Jain, Founder, Investography.

Back to basics

Ahead of savings and investments, it is crucial for women to cover against any health risks. Unforeseen medical expenses may eat upon your investments and pull down your goals for which you have been saving for long.

"It won't be incorrect to say that the need for health insurance is 'gender-agnostic'. Increasing incidence of lifestyle and chronic ailments such as diabetes, hypertension, cancers etc., coupled with rising healthcare costs - require both men and women to have adequate and dependable healthcare financing options. Therefore, women should look at insuring their health for the same reasons as men," says Ajay Shah, Director and Head - Retail Sales, Care Health Insurance.

Apart from basic health insurance products, Shah recommend women to explore customised plans designed specifically for women. "All health insurance products on the market cover both men and women. In fact, certain products offer customised solutions specifically for women. For example, health insurance offering annual health check-ups that include tests that are important to specifically assess women's health parameters such as cancer markers are advised for every woman above the age of 50 years, or the introduction of maternity and other related products," he adds.

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