Studies show that women are likely to invest in equity for financial goals related to children, such as education and child marriage. Equity investments that can provide returns above inflation over time are suitable for long-term financial goals
Indian women have made tremendous strides in a male dominated society. From banking to politics, they have left their mark in all spheres of life. However, even working women depend on male family members to make investment decisions. This changed after the lockdown in March 2020 when Indian women in Tier 2 and Tier 3 cities started investing heavily in stocks. For example, according to recent data, of the 22 million mutual fund investors served by CAMS, 5.9 million, or almost a quarter, are women. Let’s take a look at women’s investment trends in stocks and mutual funds.
Investment trends of women in stocks and mutual funds
Investment holding patterns of female investors show a preference for pure equity funds over debt or hybrid funds. According to CAMS, a registrar and transfer agent, 76% of female investors prefer equity funds. Additionally, only 6% of female investors prefer non-equity funds and 18% focus on both categories.
In line with trends on other platforms, ClearTax saw significant growth in 2019, with around 24% of new investors being women. Additionally, it jumped nearly 30% in calendar year 2020 and showed similar numbers for calendar year 2021.
Demographics show that younger women are participating in stock markets. For example, Gen Z and Millennials in the 20-35 age bracket make up around 30% of total female equity investors. Moreover, Indian women are cautious investors and select equity funds and stocks after doing research.
Studies show that women are likely to invest in equity for financial goals related to children, such as education and child marriage. Equity investments that can provide returns above inflation over time are suitable for long-term financial goals. Plus, since many female equity investors are millennials, they have time on their side to achieve these goals.
Another exciting investment trend seen after the 2020 lockdown has been the increase in the number of female equity investors in Tier 2 and Tier 3 cities. Studies show that women in smaller cities such as Nagpur, Kochi , Rourkela, Guntur and Nashik, etc., focused on equity investments to achieve their financial goals.
During the lockdown, women in small towns learned the ropes of mutual fund investments and stocks. The widespread use of technology has spawned several investment apps to help women choose the right stocks and mutual funds after doing research. Moreover, many of these new female equity investors are millennials, which will lead to the tremendous growth of the mutual fund industry in India.
Investing Trends by Women: SIP vs. Lump Sum
AMFI data shows that Indian mutual funds had about 5.28 crore SIP accounts as of March 2022, through which investors invest in mutual funds. SIP monthly collections hit an all-time high of Rs 12,327.91 crore in March 2022.
However, CAMS data shows gross inflows of Rs 25,000 crore made by female investors through Systematic Investment Plans (SIPs) in 2021 compared to Rs 1.6 lakh crore in lump sums. Many female investors may prefer lump-sum investments in equity funds to reach their financial goals faster. However, this involves timing the stock market, and even market-savvy investors struggle to get it right.
Mutual funds offer the SIP facility where you regularly invest fixed amounts in mutual funds. We invest at all levels of the stock markets, buying more units when the markets are down and fewer units when the stock markets are going up.
It averages the purchase price of units called Rupee Cost A Average without timing the stock market. SIP encourages investors to hold their equity investments for the long term. Additionally, investors benefit from the Power of Compounding advantage, the return on equity investment returns.
SIPs should not be discontinued when the stock market crashes. It provides the opportunity to buy shares at a lower Net Asset Value (NAV) and improve the Rs cost averaging advantage. Additionally, it eliminates emotional investments and focuses on regular contributions to achieve financial goals.
Mutual fund houses served by CAMS received gross inflows of Rs 1.82 lakh crore from female investors in 2021. This shows that millennial women have realized the importance of equity investments to achieve vital financial goals. In a nutshell, young women invest in long-term stocks for their inflation-fighting potential over time.
(The donated article is attributed to Archit Gupta, Founder and CEO of Clear and was exclusively created for the BW Disrupt website)