Independence Day 2023: Time to rally behind financial independence of women investors

As we commemorate another Independence Day, let us also recognize the strides women are making in moulding their own financial destinies. Just as our nation fought for freedom, women are breaking barriers in wealth creation and investment. In the spirit of this occasion, we look into the incredible journey of women who are redefining trade psychology, guiding financial ships, and advocating for a future where financial freedom knows no bounds.

The phrase"lady luck" often resonates in trading circles, yet wealth managers have encountered challenges in encouraging women to engage in investment markets. A disparity exists between women's inclination to embrace risk and their preference for certainty. The perception of risk in markets, akin to the domain of gamblers, acts as a barrier.

Additionally, the prospect of losses and the subsequent conversations with spouses can be an uncomfortable experience. Perhaps men get more leeway in this conversation from their spouses than women are expected to get. Nonetheless, it's crucial to acknowledge that with a grasp of risks and ample time, listed markets provide a straightforward avenue for wealth accumulation.

Navigating female investment and influence

While it is true that many women have asset accounts, this is frequently influenced by a male family member, typically the spouse. While women have acquired independence in many aspects of life, most still lack the ability to make independent financial decisions. However, numerous studies indicate that the overconfidence of male investors causes women to outperform men. Yet, there are a number of female fund administrators in our Indian Asset Management Companies (AMCs).

Deliberate decision-making and conservative strategies

Observations reveal that women investors tend to exhibit a greater level of restraint once they comprehend the associated risks. This contrasts with male investors, who often seek portfolio volatility as a gauge of their investment advisor's prowess. Reiterating that markets typically outperform fixed deposits over a 20-year period as long as there is real GDP growth. There is no 20-year period in history where fixed deposits have outperformed stock market indices.

The primary reason is that the cost of capital, which is derived from the bank lending rate, is greater than the rates on fixed deposits. In order for real GDP to increase, fixed capital formation, which is measured by real GDP, must outpace this cost of capital. In such scenarios, this mechanism assures that the return on equity exceeds the return on fixed income.

The rise of women in entrepreneurship and investment

India's startup arena is witnessing a paradigm shift as more women entrepreneurs and investors make their mark. From a 16% to 24% surge in female investors within two years, these pioneers are inspiring a new generation. While conveying their success as entrepreneurs remains a challenge, their impactful contributions are undeniable. Empowered by rising incomes and digital platforms, Indian women are embracing investments as avenues for financial security and autonomy, debunking traditional notions. This transformative trend not only redefines the investment landscape but also propels women to new heights of economic empowerment.

Challenges and collective solutions

Despite notable progress, obstacles persist. Women in tier-2 and tier-3 cities face limited access to financial resources and information, often relying on family members for investment choices. Addressing these issues requires concerted efforts from public and private sectors. Initiatives such as Financial Literacy and Credit Counselling Centers (FLCC) and Pradhan Mantri Jan-Dhan Yojana enhance financial literacy and accessibility, while startups offer tailored financial products and education.

The thriving mutual fund industry and female participation

The mutual fund industry in India is burgeoning, propelled by the increasing participation of women investors. According to the Association of Mutual Funds in India, female participation surged 14% from December 2021 to December 2022, surpassing 74.5 lakh investors. Women from both top and bottom-tier cities contributed to this growth, particularly those aged 25-35. The surge in female participation underscores the trend of opting for investment routes as earnings commence.

The call for financial independence

In today's world, a woman's role extends beyond homemaking. With a focus on careers, working women and businesswomen often achieve financial independence. However, many women may not perceive this independence as a necessity. Recognizing the potential for empowerment, financial independence holds several advantages. It allows women to contribute to daily expenses, pursue personal interests without constraints, earn respect, raise their voices against injustice, and foster self-identity and confidence.

The bottomline

The empowerment of women in finance ushers in a transformative era, shaping the future of wealth. As gender perspectives evolve, women's active participation in investment and entrepreneurship emerges as both an imperative and a catalyst for a more inclusive and prosperous future. 

The changing psychology of trading, successful women investors, and evolving perceptions of financial independence collectively underscore the pivotal role of women in shaping the financial landscape. By championing financial literacy, dismantling barriers, and fostering inclusivity, we pave the way for a truly equitable and empowered future where women excel as investors and entrepreneurs!

Abhishek Banerjee, Founder & CEO, Lotusdew Wealth and Investment Advisors