Gone are the days when housewives were called housewives. Today, housewives are called homemakers. Yes, homemakers do a lot of work. Homemakers take care of the children and manage household finances. For decades, housewives...sorry homemakers....have saved money in savings bank accounts for a rainy day. But today, savings bank rates have been cut with most banks offering just 3.5% a year.
After demonetization, savings bank accounts and FDs have cut interest rates. The Government has also cut interest rates offered on small savings schemes like PPF and NSC. In these times of low interest rates, many citizens have started investing money in mutual funds, especially equity mutual funds. Mutual Funds come with a disclaimer, "Mutual Fund investments are subject to market risk. Please read the offer document carefully before investing."
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Before a homemaker invests in mutual funds, she needs to set her financial goals, time frame of investments and risk profile (how much risk she is willing to take in investments). Only then can she pick the right mutual fund.
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Homemakers invest most of their savings in SB accounts. These SB accounts give just 3.5-4% a year. With retail inflation measured by CPI being quite high, (CPI Inflation was 5.21% for December 2017), the returns from savings bank accounts may be actually negative. Don't you think homemakers must look to invest in mutual funds?
Mutual funds can be classified as debt funds, equity funds and balanced funds. Debt funds invest most of your money in bonds. They are suitable for homemakers who want low risk in investment. You may get 7-8% returns a year from debt funds.
Don't you think these returns are higher than interest earned from SB accounts?
Balanced funds invest in a mix of debt and equity. Balanced funds give higher returns than debt funds. They are suitable for homemakers who are fine with medium risk. (Willing to accept a little risk in investment for decent returns).
If you are a young homemaker (in your 20's or early 30's), willing to accept risk for high returns, then consider an investment in equity mutual funds. You may get returns around 10-12% a year, over the long term.
Lets first understand what is a short-term financial goal. If you want to achieve a financial goal within 1-3 years, this is a short-term financial goal. Saving for a holiday can be a short-term financial goal.
If you are a housewife looking to invest some money in mutual funds to meet short-term financial goals, always invest in debt mutual funds. These may be liquid funds which invest your money in money market instruments like Treasury Bills, Certificates of Deposits or Commercial Paper. You can also consider an investment in debt funds which invest in Government and Corporate Bonds.
Homemakers can invest lumpsum amounts in debt funds for short-term financial goals.
If you are a young homemaker (late 20's to early 30's), willing to accept risk for high returns, consider an investment in equity mutual funds. Opt for equity diversified mutual funds which invest your money across sectors like Oil and Gas, Pharma, Technology, Energy, Metals and so on. Your investment is protected because if some of the sectors are underperforming, the other well-performing sectors, make up for it.
An investment in equity is for the long term. Homemakers must stay invested in equity mutual funds for at least 5-7 years to see good returns. Homemakers can invest in equity mutual funds for money in old age or to meet any major financial emergency.
Invest in equity mutual funds via SIP (Systematic Investment Plans). SIP is a method of investing in mutual funds. You invest a fixed sum of money, say once each month or quarter, regularly in a mutual fund scheme. With SIPs you invest regularly in the stock market, irrespective of stock market levels. Your returns earn returns and you enjoy the power of compounding.
AMFI is running a highly successful campaign urging you and other homemakers to invest in mutual funds called Mutual Funds Sahi Hai. You can invest in mutual funds with just Rs 500 a month. Investing in mutual funds is easier than you think. Systematic Transfer Plan is a smart way to invest a lump sum amount in equity mutual funds. These are some of the campaigns run under Mutual Funds Sahi Hai. Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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