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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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Money, worth, finances, economics: These terms are used interchangeably by people. The amount of money you earn/have is assumed to be your worth. If you are good at handling finances, people assume you are good at making money. If you can set a budget and stick to it, you are thought of as a good financial planner. It’s all very confusing and very blurry. It’s time to declutter a lot of these conceptions.
Most financial literature is geared toward women, and consequently most financial decisions in households are made by men. A 2019 DSP Winvestor* survey showed up startling results. Only 33% of women take independent financial decisions. 13% of women are forced to take financial decisions because of divorce or death of their husbands. 80% of women were introduced to investing by their husband or father. Most women (between 38%-44%) take decisions on gold/jewellery, day to day stuff and home durables.
When you take a look at the numbers above, you start to see a pattern. Most of the Women take decisions that have short-term impact. These decisions are not mostly directed towards the future. Women often say, “I can spend my money any way I choose. I am financially independent.” That might not always be true. Just because you have money doesn’t mean you have financial freedom.
Difference between Economic Freedom and Financial Freedom
A lot of women assume that they have Financial Freedom because they are working professionals. Homemakers assume that they have Financial Freedom because they receive a certain amount from their husbands every month.
When you make/receive money every month, that’s called Economic Freedom. Having the freedom to decide what you want to do with that money is called Financial Freedom. Economic independence focusses on individual goals. Financial Freedom is living the way you want and ensuring that bumps on the road do not derail your goals.
For example: Taking off for a vacation at short notice is Economic Freedom. However, if you have to stay in a toxic job because you can’t afford that vacation means you don’t have Financial Freedom. For a homemaker, you might be sending your parents a certain sum of money every month from the funds received from your husband. That is Economic Freedom. However, if you receive lesser amount of money for a month or two and you are unable to give money to your parents, it means you lack Financial Freedom.
How do women get on the path to Financial Freedom?
A relatively safe option for you to take your first steps into the world of finance is via debt hybrid funds. These funds are mutual funds that have a mix of both equity and debt instruments. The primary objective of these funds is to minimize risk and maximize profits. These funds have maximum of 75% of their financial resources that are invested into debt instruments like debentures, bonds, treasury bills etc. while the balance 25% is invested into equities that will boost the return. At any given point in time, the allocation to equity is restricted at 25%.
This is a good first financial product to buy because the debt part of the fund delivers steady returns. Your capital is intended to be preserved during volatile market conditions and receives a significant boost when the market starts to move up. Examples of few funds are:
Fund Name
6 Months*
1 Year
3 Year
5 Year
10 Year
Equity Allocation
Data as on 28th Feb, 2023 | Source: MFI explorer
*Absolute Returns
* Less than 1 year Absolute returns, Greater than or Equal to 1 year Compound Annualized returns
To give an example, Kotak Debt Hybrid Fund invests ~25% in equity & remaining in debt. Out of the 75% in debt, ~70% is invested in Sovereign, AAA or equivalent rated issuers. This is ~93% of the entire debt portfolio.
Women who want to start off their investment journey should ideally set up a call with their Finance Professional or Relationship Manager at their bank. They need to list out their goals, and understand how do they need to invest in order to achieve those goals. They need to learn about financial instruments and the risks associated with them.
Source:* https://www.dspim.com/docs/default-source/other-updates/dsp-winvestor-pulse-2019_300519.pdf?sfvrsn=2
Disclaimer:
Mutual fund investments are subject to market risks, read all scheme related documents carefully. AMFI Registration Number (ARN) 1390. Please read the offer document carefully before investing. The calculator is only an illustration, to demonstrate the concept of compounding/investing and should not be constructed as a promise, guarantee or a forecast of any minimum returns or future returns. Kotak Mahindra Bank does not assure any safeguard of capital and investments through SIP, does not guarantee or assure any protection against loses.
This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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