10 Mins

Women empowerment has been remarkable in India over the last few years. Women are not only educated but also independent financially and socially. They are capable enough to lead a family, organisation and society. Saving money is a key priority for women. There are different investment avenues available for women. Investing money enables them to be independent, support their family, and maintain a good healthy living standard. In this article, we will discuss the Best Investment Options for Women available in India.

Top 6 Best Investment Options For Women

The following are the Best Investment Options for Women – 

Mutual Funds 

There are a variety of mutual funds available in the market for investment. There are different mutual fund schemes that suit your investment objective and risk tolerance level. You can invest in a mutual fund via lump sum or SIP. However, SIP is the most preferred option. The following reasons why SIP is suitable for women – 

  • You start investing with a monthly amount as low as Rs.500 for the desired mutual fund scheme. 
  • SIP is a disciplined method of saving money for the future. Unlike the one-time investment option, you can opt for regular and monthly/quarterly deposits for a defined tenure. Also, it gives you the benefit of rupee cost averaging.
  • Investment in an ELSS fund qualifies for tax deduction under Section 80C
  • SIP helps to diversify your investment portfolio by investing in one or more schemes simultaneously. In other words, you can invest in different asset classes by selecting different schemes.
  • There are schemes available for every type of women investor based on their investment objective, time horizon and understanding of risk. 

Exchange Traded Funds (ETF)

An Exchange Traded Funds (ETF) is a passive investment fund that merely replicates the underlying benchmark index. In other words, the composition of the ETF portfolio matches the composition of the benchmark index in the same proportion. The following are the reasons why ETF is a suitable option for women. 

  • The ETF matches and tracks the performance of the index. Simply put, ETF returns are similar to or higher than the benchmark index. 
  • Since the ETF portfolio is not actively managed, you need not worry about tracking the fund continuously. 
  • There are different types of ETFs available, like equity ETFs, bond ETFs, currency ETFs, commodity ETFs, etc. 
  • You can easily buy and sell ETFs on the stock market through your Demat account

Gold

Gold is always a go-to asset and favourite ornament for women in India. It has a great emotional and social value attached to it. Buying gold in the form of coins, bars, biscuits or jewellery on any auspicious day is a tradition in India. This asset with such sentimental value has become popular in different forms. The following are reasons why gold is a suitable investment option for women – 

  • Investing in gold helps to hedge the portfolio against potential market risk. 
  • You can invest in gold digitally through gold bonds or gold ETFs. Some bonds also provide an option of converting into physical gold after a specific tenure. 
  • Women can consider investing in these bonds if they aim to buy physical gold or jewellery after a specific period. 
  • Gold is a liquid asset and can provide inflation-beating returns in the long term. 

Recurring Deposits

A recurring deposit (RD) is a saving option that helps women to save for their future. It is an interest-bearing instrument having a fixed maturity period. It is a convenient option for you when you hold a savings account in a bank. You simply have to deposit a monthly amount. The following are the reasons why RD is a suitable option for women – 

  • You have the flexibility to choose the investment amount, which can be as low as Rs.10. 
  • You can also choose the investment tenure, which ranges between six months to 10 years. 
  • The interest rate of RD varies depending on the bank and tenure. It usually ranges between 3.5%-8.5% for different periods. Also, the interest is compounded quarterly. 
  • If you are a senior citizen, you will earn a slightly higher interest rate than others. 
  • RD provides high liquidity where you can withdraw anytime. However, there are certain penalty charges applicable. 

You can explore our RD Calculator to find out interest and maturity value earned by the banks & post office.

Fixed Deposits

Fixed Deposit (FD) is another popular traditional investment option among Indians. This can be a suitable option for women looking for guaranteed returns from their investments. Every bank offers different interest rates on FD based on tenure. The following are the reasons why FD can be a suitable option for women – 

  • The tenure of a fixed deposit ranges from 7 days to 10 years. 
  • The interest rate ranges from 2.5% – 8% depending on tenure and bank. You can choose to receive interest payments monthly, quarterly, half-yearly or annually depending on your requirement. 
  • You will receive an additional interest rate on your fixed deposit if you are a senior citizen. 
  • Investment in tax-saving FD qualifies for tax deduction under Section 80C of the Income Tax Act,1961. 
  • Fixed deposits are highly liquid investment instruments where you can withdraw your money anytime. However, a specific penalty is charged. 

Explore FD Calculator

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is one of the safest and most reliable savings schemes as the government backs it. This can be an ideal investment option for women who don’t want to risk their hard-earned money. Also, investing in a PPF gives them fixed returns after a specific tenure. The following are the reasons why PPF is suitable for women – 

  • PPF is readily available where banks, financial institutions and post offices offer it. 
  • This is a risk-free investment option as it offers a fixed interest rate for a specified period which is 15 years. Currently, the PPF interest rate for the financial year 2022-2033 is 7.1%. 
  • You can start with a minimum investment amount of Rs.500, and the maximum amount is Rs.150,000 in a financial year. 
  • In addition, investment in PPF also offers tax benefits under Section 80C of the Income Tax Act,1961. 

Why is Investment Important for Women?

The working population of women is rising, and it has become convenient for women to make their investments. Here are some reasons why investment is important for women – 

  • Financial Security – Investing regularly helps to create a substantial corpus. This will help to achieve the financial goals in future. Also, it provides a cushion to the family in case of financial emergencies. 
  • Supporting Family Goals – Long-term goals such as buying a house, raising children’s education, etc., require a huge corpus. Sometimes, salary and savings are not sufficient to meet these goals. Therefore, proper investment planning is necessary to achieve long-term financial goals. 
  • Financial Support to Old Parents – As parents grow old, they require physical and mental help. Therefore, investing ensures you do not have to spend your entire salary. 
  • Planning for Children’s Future – Every parent wants the best for their children. With the cost of education rising every year, it is essential to start saving to ensure a good education for your child. Also, it helps to create a lumpsum amount required to fund the education cost. 

Things to Keep in Mind Before Investing

Investing money is not just about parking money in an instrument. It is essential to shortlist the right asset. Also, you must consider multiple aspects before investing. The following are the things to keep in mind before investing – 

Investment Objective

Every asset class has a unique objective. It is vital to align your investment objective with that of the asset class to achieve your desired goals in future. All investment instruments do not meet the requirements of all investors. What works for you may not work for another investor. Therefore, you must carefully align the financial plan and investment objective with the financial goal. Also, your contribution towards the family’s long-term objective will help to achieve the goal faster and will not put all the financial burden on one person. 

Investment Horizon

There are different investment options available for different investment horizons. For instance, a tax-saving FD has a lock-in period of 5 years. Similarly, a PPF has a lock-in period of 15 years. Conversely, mutual funds do not have a lock-in period, but staying invested for a minimum of 3-5 years is advisable to achieve the desired results. Therefore, depending on your financial goal, it is wise to choose a suitable investment option with the right investment horizon. 

Risk

Every asset class has a certain risk associated with it. In other words, it is the measure of the price volatility of an asset in response to changes in market situations. For instance, stocks or equity investments are subject to high volatility. On the contrary, fixed deposits and government-backed savings schemes offer guaranteed returns. Not all women investors are comfortable with understanding the risk. Therefore, women should invest in instruments with volatility they can tolerate. 

Returns

Every investment offers different returns. Some offer high returns, but their risk is also high. At the same time, some offer guaranteed returns which can be low. Every woman investor invests with the expectation of generating significant returns. Therefore you must do your own analysis of the asset’s historical returns and performance. Even though historical returns do not guarantee future returns, it is a good parameter to evaluate the asset performance across different market cycles. 

Costs and Expense

There are certain costs and expenses associated with every investment. For instance, stocks attract transaction costs. Mutual funds have fund management costs, exit load charges, etc. Furthermore, some investments charge a penalty for premature withdrawals. Therefore, while selecting your best investment option, you must consider the cost and expenses attached to them. It is wise to invest in a scheme with low cost and expense. 

Liquidity

Investing in assets which offer good liquidity is important. This is because you can address any unforeseen events. Also, there is no burden on your monthly salary. For instance, mutual funds, stocks, and fixed deposits are highly liquid investments. You can easily convert it into cash. Therefore, holding assets with good liquidity in your portfolio is critical.

Lock in Period

There are certain investments that have a lock-in period. Lock in period is the minimum duration needed to hold the investment. For instance, PPF has a lock period of 15 years. Similarly, FDs have a lock-in period of 5 years. Mutual funds ELSS schemes have a lock-in period of 3 years. Therefore, these investments with a lock-in period do not allow premature or partial withdrawals. Therefore, you must be aware of the funds that will not be available during the lock-in period duration.

Taxation

Returns from any investment are taxable. For instance, mutual fund returns are taxable based on the holding period and the type of fund. On the other hand, some investment returns are tax-free, like PPF. Therefore, you must know your tax obligation and benefits before investing. You can also use Scripbox Income Tax Calculator to estimate your taxable income. It helps to estimate your tax liability.