A STEP-BY-STEP LOWDOWN ON WHAT, WHY, HOW AND WHERE OF INVESTING FOR WOMEN

An investor education initiative

INVEST FORPROGRESS

Follow us at : An investor education and awareness initiative by Franklin Templeton Mutual Fund.Mutual Fund investments are subject to market risks, read all scheme related documents carefully

SIP. It’s like a Good EMI.

IT'S TIME TO WRITE YOUR OWN FUTURE.Secure your tomorrow by investing a little bit every month. Start a Systematic Investment Plan (SIP) to help build a better tomorrow.

A Reason to Make Your Family Proud

Words would fall short to describe the roles women play in a family. But if we do so, a brilliant multi-tasker is the common connect between all these roles. Women are

naturally gifted to strike a balance between their careers and home, and they have excelled at both in their own ways. This includes managing their roles as a spouse, a mother, a sister, a homemaker and above all balancing this with their career. They are able to do so by prioritising right and taking hard decisions quickly.

It is also encouraging to see more and more women entering the work force. This also means that men are no longer the sole bread winners in a family. Besides, as more and more women enter the workforce, the need for them to understand the world of saving and investing will also grow.

However, the flip side is that most women make less money compared to men over their lifetime as the chances of them dropping out of the workforce is also higher. The reasons for the drop-out could be to take care of their children or elderly parents or in-laws, etc. Statistics also indicate that they live longer than men. In view of these realities, it is important that women have a money nest available in times when they are not earning. This is also why they need to be more involved with financial decisions in their earning years. What therefore they need is a right start for a better and a financially secure future.

“A woman is the full circle. Within

her is the power to create, nurture and

transform.” – Diane Mariechild,

Author

67.4years

70.3years

Life Expectancy

Source: WHO data, 2018

Investing

1

When it comes to investing, the big difference between men and women

is the ability of women to be disciplined and stick to a plan than approach investing like trading. Women also tend to be more patient especially when the markets are volatile and are less impulsive decision makers.

Several studies indicate that for the most part, women approach financial planning with much more enthusiasm, commitment and diligence. It may be

noted that a woman’s ability to work on a financial plan with purpose and thinking holistically about their future financial needs, works in her favour.

All these traits make women investors not only different from men but also helps their investments perform better compared to men in similar circumstances. This is proven by Warwick Business School in their research which showed that return on investment for women were on an average about 1.2% higher than men.

By Being Financially Independent Of Women InvestorsEnrich Your Life Psychology“Money won’t create success, the freedom to make it will.” – Nelson Mandela, Former president of South Africa

Not only is personal finance

and investing rarely taught in schools or at home, but women

are often discouraged from talking about or managing money. Even working

women, many-a-times restrict their financial involvement to providing income to the household than participate in financial

matters. This needs to change!

Living life on your own terms is independence. It is about choosing your life partner, career, choice of work place and more. Money plays a big part in the decisions you make

towards independence.The first step in achieving financial independence is to get involved in household

finances. Women are actively involved in several aspects of household decisions, especially day-to-day household spending. But, the same is not necessarily the case when it comes to the combined household income, expenses, savings and investments. It is more often the role of husbands, fathers or siblings when it comes to deciding where to save and invest, even on behalf of working women.

Women can involve themselves with family finances by asking basic questions about income, expenses and savings, to get a sense of the overall inflows and outflows. The next steps would be to get involved in budgeting of resources, setting financial goals and taking a holistic approach to savings and investments, tax planning and wealth creation.

2

3

StartInvesting

StopSaving“Do not save what is left after spending, but spend what is left after saving.”

– Warren Buffett, The Legendary Investor

Simply put, savings by itself does not increase the value of your

money. This is so, because, prices rise and what you could buy for say the worth of `100 a year ago, is now worth `10 or `20 more this year. When you leave your money idle as savings, inflation eats into it. Inflation is integral to our financial life and will stay that way and that’s why we need to not just save, but also to invest our savings. In fact, women understand inflation better because they are involved in household expenses.

Investing means putting your money to work to protect you from inflation, which

is known to decrease the value of money if kept idle over the years. Investing helps you beat inflation to maintain the same standard of living every year.  

Seema recently received her annual bonus of `1 lakh. She plans to invest this money and is curious to know how her investments would fare across time frames assuming different growth rates.

She was pleasantly surprised to know the potential value of her investment in the long-term, thanks to the ‘magic of compounding’.

In this table, you will notice that Seema will earn more in the subsequent 5 years than in the previous 5 years and so on despite the principal she invests being the same. This is because only her principal earns returns in the first 5 years. In the next 5 years, both her principal and previous earnings together make more returns, and this continues until the maturity of her investment. Hence it is called the ‘magic of compounding’ because the longer you invest, the more wealth you can potentially create.

Address unforeseen events – To fall back on your investments because of events such as a layoff, untimely demise of spouse, divorce, break to look after child/ ageing parents/in-laws, or any other such situation.

Women outlive men – Average life expectancy of women is higher than men resulting in longevity risk (the risk of outliving one’s assets).

To achieve financial goals – It is important to invest specifically for goals rather than have a ‘one size fits all’ approach.

To beat Inflation – To be on top of your finances, you need your savings to beat inflation, which can be achieved by investing.

Financial freedom – To reach a stage in life when you have enough money to not work and live off your investments.

Retirement Corpus – Women must plan a retirement corpus assuming lifespans touch 90 years with advancement in medical science. Further, women generally outlive men making it more important for them to understand the nuances of their investments.

Reasons why women should start investing at the earliest

How ‘Magic of Compounding’ Pleasantly Surprised Seema…

How Does it Work? Magic of Compounding*

SAVINGS= ‘WHAT YOU

EARN’ MINUS ‘WHAT YOU SPEND’

If you spend more than what you earn, you get into a negative zone by getting into a debt trap or are already into one.

If you spend less than you earn, you have a positive cash flow,

which will let you build wealth.

What isInvesting?

Rates of Return/Period  8% 10% 12%

5 Years 1.5 1.6 1.8

10 Years 2.2 2.6 3.1

15 Years 3.2 4.2 5.5

20 Years 4.7 6.7 9.6

25 Years 6.8 10.8 17

30 Years 10.1 17.4 30

*Value of `1 lakh invested as lump sum with different rates of return. For illustration purpose only, name used is fictitious.

4

5

Financial planning is over and above investing. It is the process of meeting your life’s financial goals through proper management of your financial resources (income and

expenses). These goals may include purchasing a home, saving for your child’s education or planning for financial independence. Effectively, financial planning will help you determine your short and long-term financial goals and help you meet those goals.

For WomenFinancial Planning

“A goal without a plan is just a wish.” – Antoine de Saint-Exupery, French writer

Financial Planning MythsFinancial planning is needed only towards retirementFinancial planning is a life-long process. You need to have a plan for each life goal. The earlier you start, the sooner you can enjoy the benefits – and the more time you have to grow your savings.

Financial planning is another name for investingFinancial planning is more than just investing. It is about the big picture – bringing together all aspects of personal finance to achieve your financial goals.

Financial planning is a one-time exercise Financial planning is not a one-time activity. You should revisit and review your financial plan regularly, to make sure you are on the right track towards achieving your goals.

You need a lot of money for financial planningEveryone can benefit from financial planning, not just the rich and wealthy. No matter how much income or savings you have, you can always benefit from having a clear plan for your finances.

Depending on your financial situation and stage in life, you

may be able to identify your financial goals such as down payment for a house; self-fund your marriage, child’s education, retirement, vacation or purchasing a car and so on. Setting a financial goal by fixing its cost and a time frame will help you plan your budget accordingly, as well as work out a strategy for deciding on the appropriate investments. With measurable and clearly defined goals, it will be easier to monitor the progress.

SettingFinancial Goals

In the next few years, I want to…

In the long run, I want to…

Financial Goals

Goal Year AmountSet aside emergency funds

2019 `3 lakh

Buy a car 2021 `7 lakh

Buy a home (down payment)

2025 `15 lakh

Get married 2030 `5 lakh

European Vacation 2031 `3 lakh

Goal Year AmountPay off my mortgage 2035 `75 lakh

Create an overseas education fund for my children

2040 `1 crore

Build an egg nest for my retirement

2045 `3 crore

(Note: Goal amounts need to be adjusted for inflation over the number of years of the goal)

Indicative goals with time frame for a 25-year old  

Home

Car

Laptop

iPhone

Marriage

Vacation

Bike

Retirement

1. Assess your financial situation

2. Create a budget 3. Set your financial goals4. Know your risk tolerance5. Select asset classes and

corresponding products to invest

6. Work out and implement a basic financial plan

7. Regularly review and adjust your financial plan

Step Financial Planning Process7

6

7

Many people have the misconception that mutual funds are for those who

want to invest in the stock markets. The truth is that mutual funds can be used for practically every financial need of a person – from short-term savings (that are typically parked in a savings bank account) to long-term retirement needs. Mutual funds provide many advantages that can help women achieve their financial goals and financially empower them.

Your One-Stop Shop For All Asset Classes Mutual FundsAny delay in saving and investing has a steep cost attached. The below example

explains that even if Priya tripled her savings, she cannot match the wealth created due to Sheetal’s early start.

Cost of Delay

Particulars Sheetal PriyaStarts investing at the age of 25 45

Monthly Savings `5,000 `15,000

Returns p.a. (Assumed) 12.00% 12.00%

Investment till the age of 55 55

Total Investment `18 lakh `18 lakh

Accumulated amount at Age 55 `1.76 crore `34.85 lakhs

Rate of return assumed is 12% p.a. and actual results may vary. Names/Characters portrayed are fictitious

An important part of your financial planning is to evaluate your tolerance for risks.

Investments that deliver potentially higher returns are usually accompanied by higher risks. Are you willing to accept potential short term losses in exchange for greater potential gains in the long run? For example, investing in equity funds over the long run of 8-10 years has the potential to pay off, but the same may or may not be the case if you invest in equity funds for a year or two.

There are several vehicles in which one can invest depending on your risk tolerance and the expected returns that are possible with these instruments. For instance, money in a bank fixed deposit will guarantee returns and protect the capital. But, returns will be lower compared to potential returns from long term investments in equity funds which also come with a risk of capital erosion.

Know Your Risk Tolerance

Choice of Investments

Affordable: Almost anyone can buy mutual funds, because investments in mutual funds start at as low as `500, which makes them immensely affordable.

Professional Management: For an average investor, it is a difficult task to decide which securities to buy, how much to buy and when to sell. However, when you buy a mutual fund, you have a professional fund manager who manages your money.

Liquidity: You can redeem your mutual fund investments in open ended funds on any business day, making them highly liquid investments.

Diversification: Typically when your investments are spread across several securities, your risk reduces. A mutual fund helps you to diversify across companies, sectors, asset classes, issuers and geographies which an ordinary investor may not be able to do easily.

Tax Efficient: If invested smartly, mutual funds are highly tax efficient (conditions apply).

Advantages of Investing in Mutual FundsInvestment Instruments

Bank Deposit Property Gold Public Provident Fund

Listed Shares Mutual Funds Pension Plans

Indicative list

MUTUAL FUND

Pool in their

Money

Fund Manager

Invests in Securities

Securities

Generates

Returns

Passes back to

Investors

8

9

There are several types of mutual fund schemes to suit specific investment needs. For instance, there are equity mutual funds that have the potential to deliver

returns higher than inflation, in order to create wealth in the long run. There are funds that can be used to save income tax under Section 80C and funds where you can even keep money overnight. Broadly there are four clear groups under which mutual funds can be categorised (See box).

The Various Hues of Mutual Funds

Rupee Cost Averaging via SIPs

MF Categories1. Equity Schemes – will invest

in equity and equity related instruments

2. Debt Schemes – will invest in debt instruments

3. Hybrid Schemes – will invest in a mix of equity, debt and other asset classes like gold, foreign securities, etc

4. Solution Oriented Schemes – will have schemes like retirement schemes or children savings scheme

SIP is a simple investment process that facilitates disciplined, regular and

long term savings. SIP is economical on your wallet @ `500

per month as a minimum contribution. SIP is simple to start.

SIPs overcome market volatility by way of disciplined regular investing.

SIP offers you the convenience to invest regularly and in a frequency that suits you.

SIPs help you create long-term wealth. SIPs help you deploy your incremental

earnings every year automatically via Step-up SIPs

SIPs: Little Drops Make The Mighty Ocean

You can invest either as a lump sum or in small sums over regular intervals. The latter is known as Systematic Investment Plan (SIP). SIP is a financial planning tool to create wealth and achieve your long-term financial goals by contributing a fixed amount in an equity scheme(s) at regular intervals. This is good way for a first-time investor to bring discipline into her investing process. Variants like Step-up SIPs should also be used to invest annual incremental earnings automatically.

Making Mutual Fund Investing Simple

SIP Compounding Effect Over the Long Term

Period Principal ` lakh Final Value ` lakh*

Growth of Principal (Compounding Effect)

10 years 12 23.2 almost 2 times

15 years 18 50.5 almost 3 times

20 years 24 100 over 4 times

25 years 30 190 over 6 times

*SIP of `10,000 per month assuming growth of 12% p.a. For illustration purpose only, actual results may vary

With rupee cost averaging via SIPs, you can take advantage of the market highs and lows for your benefit. By making a fixed amount of investment every month through mutual funds, you can average out the value of each unit. Rupee cost averaging helps you buy more units when the market is low and less units when the market is high, bringing down your average cost per unit.

How Rupee Cost Averaging Works

SIP Investment

(A) NAV (B) No. of Units

(A/B) Remarks

`10,000 20 500 Higher NAV – Less units

`10,000 16 625 Lower NAV – More units

Average cost per unit 17.78 - -

For illustration purpose only

10

11

You can invest in mutual funds via a host of sources, offline as well as online, as per your convenience. You may even contact a professional financial advisor to choose the right products and monitor their performance as well as your goals.

Financial independence need not be a painful process. It only requires dedication, patience and consistency to invest over the long term in order to create wealth. Women are capable of such dedication and can educate themselves and work towards this goal of financial independence. While all of this may take some effort initially, it will definitely be less stressful as you get more involved and passionate about financially securing your own future.

Investing Avenues

To Summarise

Normal SIP vs Step-up SIP

Period Years

Normal SIP Step-up SIP

Principal (` lakh)

SIP Value (` lakh)

Principal (` lakh)

SIP Value (` lakh )

10 12 23.2 19 34

15 18 50.5 38 87

20 24 100 69 199

25 30 190 118 431

Assuming step up @ 10% per annum and growth of 12% p.a. Actual results may vary.

Make a Start “A journey of a thousand miles begins with a single step.”

– Lao Tzu, Chinese philosopher and writer

“Money is only a tool. It will take you wherever you wish, but it will not replace

you as the driver.” – Ayn Rand, Writer and philosopher

You will observe that an incremental investment of ̀ 90 lakh via Step-up over a period of 25 years can result in an incremental wealth creation potential of about `240 lakh.

10 Points to Remember For Women Investors

1. Get involved in household finances with your spouse or head of the family

2. Start maintaining a budget and provide suggestions to increase the saving potential

3. Be adequately insured for health, life and your physical assets

4. Investment planning is the first step, tax planning is the next step for women

5. Track your goals regularly6. Ensure that most of your incremental income and any

extra-ordinary gains are utilised towards investments7. Stay resilient and disciplined despite volatile markets8. Be financially independent of your spouse9. Attend investor education workshops to stay updated

about finance and investments10. Avail the services of a professional financial advisor

The information contained in this booklet is not a complete representation of every material fact and is for informational purposes only. We have relied on third party data or information which, we believe to be correct but, we do not offer any assurance as to the accuracy or the correctness of the same and would not accept any liability for any loss or damage arising directly or indirectly from action taken, or not taken, in reliance on material or information contained herein. The recipient is advised to consult his/her financial advisor/ tax consultant prior to arriving at any investment decision. Statements/ opinions/recommendations in this presentation which contain words or phrases such as “will”, “expect”, “could”, “believe” and similar expressions or variations of such expressions are “forward – looking statements”. Actual results may differ materially from those suggested by the forward-looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risk, general economic and political conditions in India and other countries globally, which have an impact on the service and / or investments. This communication is meant for use by the recipient and not for circulation/reproduction without prior approval. The views expressed are based on current market conditions and information available to them and do not constitute investment advice in any manner whatsoever to any party. These views alone are not sufficient and should not be used for the development or implementation of an investment strategy. All opinions and estimates included here constitute our view as of this date and are subject to change without notice. Neither Franklin Templeton Group nor any person connected with it, accepts any liability arising from the use of this information. The recipient of this booklet should rely on their investigations and take their own professional advice.

An Investor Education and awareness initiative by Franklin Templeton Mutual Fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

DISCLAIMER

SIP step-up allows you to increase the monthly investments periodically at a pre-defined rate.

It will automatically ensure your investment increases with a rise in income.

Useful for salaried investors who have a fixed increment cycle every year.

With an annual increase in investments, you will be able to achieve your goals faster.

You can step-up either by a percentage or a lumpsum increment.

SIP Step-up: Increase Investment With Rise in Income

Bank account Cheque book or net

banking for online investment

PAN card KYC verification

First Time Investors Need:

12

Follow us at : An investor education and awareness initiative by Franklin Templeton Mutual Fund.Mutual Fund investments are subject to market risks, read all scheme related documents carefully

SIP. It’s like a Good EMI.

SALE OR NOT, LET YOUR SHOPPING CONTINUE.Secure your tomorrow by investing a little bit every month. Start a Systematic Investment Plan (SIP) to help build a better tomorrow.