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June 9, 2023

Investment Tips for Moms in India

Investment tips for mom

Traditionally, moms have always been the ultimate savers. Whether it’s buying a pair of shoes right before your sports day or finding money for that one last school trip, moms always have money in their kitties.

Here are some valuable investment tips for moms so that they can become the ultimate investors too.

Importance of Investing as a Mom 

Raising a child in today’s world requires careful financial planning. From providing quality education to covering healthcare expenses, the costs can add up significantly.

For instance, the average annual school fees in India can range from ₹50,000 to ₹2,00,000 or even more, depending on the institution and location.

These expenses make it evident that investing is vital to ensure you have the financial means to support your child’s growth, aspirations, and well-being throughout their journey to adulthood.

Tip #1: Start with a Solid Financial Plan 

Before diving into the world of investments, it’s essential to have a well-defined financial plan in place. Start by setting clear financial goals, such as buying a house, funding your child’s education, or building a retirement corpus.

Assess your current income, expenses, and debts to determine how much you can allocate toward your investments. A solid financial plan will serve as your roadmap and guide your investment decisions. 

  1. Identify Your Risk Tolerance 

Investing involves taking on some level of risk. It’s crucial to assess your risk tolerance before making investment choices.

Consider your age, financial responsibilities, and personal preferences. If you have a higher risk tolerance, you may opt for equity investments such as stocks or mutual funds.

If you prefer lower risk, consider recommending hybrid, debt, or index funds that provide a more balanced approach to investing, combining the potential for growth with stability.   

  1. Diversify Your Portfolio 

Diversification is a key principle to mitigate risk and enhance returns. Spread out your assets among many asset classes rather than putting all of your eggs in one basket.

This can include stocks, bonds, mutual funds, real estate, and even alternative investments like gold. Your overall wealth is less affected by the performance of any one investment when your portfolio is more diversified.

Tip #2: Educate Yourself and Seek Professional Advice 

Investing can seem complex, but it’s important to educate yourself about various investment avenues. For better information, read books, watch webinars, and peruse online resources.

Consider consulting a licensed financial planner or investment advisor as well. They can help you understand the nuances of different investment options and tailor recommendations based on your unique circumstances. 

  1. Research and Analyze Investments 

When considering investment opportunities, conduct thorough research and analysis. Understand the fundamentals of the investment, evaluate historical performance, and assess the associated risks.

Stay updated with market trends, economic news, and regulatory changes that may impact your investments. This knowledge will empower you to make informed decisions aligned with your financial goals. 

  1. Monitor and Review Regularly 

Investing requires ongoing monitoring and analysis; it is not a one-time exercise. Monitor the efficiency of your investments and make necessary modifications.

Stay vigilant about changes in market conditions and consider rebalancing your portfolio periodically. Regular monitoring ensures that your investments remain aligned with your goals and helps you identify opportunities or risks in a timely manner. 


Investment options for self-employed parent

Investment options for self-employed parents?


Tip #3: Consider Tax Planning 

Tax planning is an important aspect of investing that can help you optimize your returns and minimize your tax liabilities.

Explore investment options that offer tax benefits, such as Equity Linked Savings Schemes (ELSS) that provide tax deductions under Section 80C of the Income Tax Act.

Additionally, be aware of the capital gains tax implications for different investments and plan accordingly to maximize tax efficiency.

Tip #4: Invest in Child-Specific Financial Instruments 

As a mom, your child’s future is a top priority. Consider investing in child-specific financial instruments like Sukanya Samriddhi Yojana, which offers attractive interest rates and tax benefits for the girl child’s education and marriage.

Public Provident Fund (PPF) is another option that provides long-term savings and tax advantages, making it ideal for your child’s higher education or other future expenses. 

  1. Create an Emergency Fund 

Maintaining an emergency fund is essential for maintaining financial stability because life can be unpredictable. Set aside a portion of your savings as an emergency fund that can cover at least six months of living expenses.

This fund will serve as a financial cushion during unexpected situations, such as medical emergencies or job loss, and prevent you from dipping into your investments prematurely. 

  1. Harness the Power of Systematic Investment Plans (SIPs) 

Systematic Investment Plans (SIPs) are a popular and convenient investment option, especially for moms with busy schedules.

You can invest a certain amount on a regular basis in mutual funds using SIPs. This disciplined approach not only makes investing hassle-free but also helps you benefit from rupee cost averaging and compounding, leading to potential long-term wealth creation.


single parent can save for higher education

How single parents can save for higher education?


Tip #5: Check Financial News and Develop Financial Literacy 

In the fast-paced world of finance, staying updated with financial news and market trends is essential. Subscribe to reputable financial publications, follow reliable financial blogs, and set up alerts for relevant news.

Developing financial literacy will empower you to make informed investment decisions, understand economic indicators, and navigate the financial landscape with confidence.

Tip #6: Have a Long-term Perspective 

The journey of investing calls for endurance and a long-term outlook. While short-term market fluctuations may cause temporary fluctuations in the value of your investments, focusing on the long-term growth potential is key.

Avoid making impulsive decisions based on short-term market volatility and instead, stay committed to your financial plan and investment strategy. 

  1. Reinvest Dividends and Returns 

When you receive dividends or returns from your investments, consider reinvesting them instead of immediately spending them. Reinvesting allows you to harness the power of compounding, where your money generates additional returns over time.

This can significantly boost your investment portfolio and accelerate your progress towards your financial goals. 

These investment tips for moms can be followed by all moms regardless of their income. You can start small and grow your wealth over the years!  

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It guarantees the strict application of laws and rules that establish the highest standards of openness and integrity—essential for stock markets as well as for the safety and trust of investors. 2. Impact of Foreign Exchange  The volatility in the value of the US and other currencies should be taken into account while investing in US equities. This is because before any gain (or loss) for an Indian investment is realized, it would be converted using the appropriate exchange rate in the Indian rupee. The gains (or losses) will fluctuate in lockstep with changes in the exchange rate. An Indian investor must be aware that the exchange rate can be unpredictable and is influenced by a wide range of political, economic, and supply and demand variables. 3. Liberalized Remittance Scheme According to the Reserve Bank of India's Liberalized Remittance Scheme, an individual may invest up to $ 250000 per year in US equities from India (LRS). The cap covers any money sent abroad for purchases, travel, education, or other international transactions during the year. The investor's brokerage account has to be filled before making any investments in US equities. Investors must complete Form A-2, which is available from RBI-authorized dealers. Any sum over the $250000 cap requires RBI approval. Additional read: US stocks for investing in child education 4. Taxation To make your efforts worthwhile, it is crucial to take into account the tax consequences of your international assets. Due to the Double Tax Avoidance Agreement (DTAA) between the US and India, the same income cannot be taxed twice on investments made in the US stock market. 5. Dividend tax The dividends from US stocks are taxed at a fixed rate of 30% for overseas investors. However, as a result of the tax agreement between the US and India, citizens of India pay a 25% tax rate (deducted before distribution). However, because of the double tax avoidance agreement between the US and India, the tax paid in the US may be claimed as a foreign tax credit in your domestic filing. 6. Capital gains tax Your assets in the US are not subject to capital gains tax. However, India requires you to pay tax on your overseas capital gains. This may be divided into two groups.: Long-term capital gain (LTCG)If you keep the equities for more than 24 months before realizing capital gains, you will be subject to indexation advantages and a 20% tax rate in addition to any relevant fees and other surcharges. Short-term capital gain (STCG)Standard income-tax regulations apply to any gains from assets held for less than 24 months, and they are added to your ordinary taxable income. You must also take into account the recently implemented Tax Credited at Source or TCS. Under the new regulations, a 5% TCS will be applied to all international transfers over INR 7 Lakhs in a fiscal year. It is not an additional expenditure to deduct this advance tax when submitting your taxes each year. Charges on US stock-broking account  Using an Indian stock brokerage account to invest in the US stock market is prohibited. You would need to create one with a US stock brokerage company instead. To provide this service, the majority of Indian stock brokers who allow you to invest in US equities typically collaborate with a US stockbroker. You would also be required to pay certain fees for a US stock broking account, just like you would for an Indian trading account. This is something you should also take into consideration when you buy US stocks because these fees can reduce your earnings. These fees include Annual Maintenance Costs, brokerage charges, bank charges, transaction charges, and more. Invest in the US stocks with EduFund  Download the EduFund app and create an account to start investing in US stocks. With zero charges and no hassle account opening process from the comfort of your home, you can start investing in FAANG stocks in your portfolio to geographically diversify your portfolio!! Thus, investing in US firms and equities may give investors access to the worldwide market, credibility, and an opportunity to increase their wealth. Consult an expert advisor to get the right plan TALK TO AN EXPERT
5 top investments for risk-averse investors

5 top investments for risk-averse investors

All investments are associated with risks. Yet, the risk is not uniform, and it's essential to be aware of the different levels of risks linked with all types of investment instruments. This is why the first thing to consider before investing is how much of a risk appetite has – how much risk one is willing to take. Want to know the best investment options for risk-averse investors but still generate good returns? Continue reading this article to know more! What is risk averse? Risk-averse refers to an investor who chooses to preserve the capital over and above its potential to generate returns that are higher than the average. Risk can refer to many factors – volatility, currency, market, credit rating, etc. Risk-averse can also refer to a conservative investor. Low risk symbolizes stability in investments. A low-risk investment generates guaranteed reasonable returns, if not outstanding, above benchmark returns. But chances are near zero that the principal investment amount will be lost. Whereas a high-risk investment option may gain or lose money over time. Risk-averse investors are unwilling to accept market volatility. They prefer their investments to be highly liquid - readily available to be withdrawn. Such investors usually include old investors or retired individuals who depend on their savings for their daily expenses. Start Investing in Mutual Funds Is FD a good option for risk-averse investors? One should constantly adjust their returns against the current inflation rate. The current Fixed Deposit interest rates are 5-7% p.a. on average. But the current inflation rates are around 6-8% p.a. Give these figures a thought. The price you pay for your everyday goods and services is rising at 6-8%, whereas your FD investments are growing at only 5-7%. FDs do not increase the value of your money over time. In fact, you actually lose money or its purchasing power over time. Do you think FDs are the safest investment option? Banks defaulting on payments is rare but definitely possible. The Deposit Insurance and Credit Guarantee Corporation (DICGC) guarantees Rs. 5 lakhs per person per bank if the bank defaults. Let's not forget the liquidity part of this instrument. Fixed deposits can have a lock-in ranging from 3-5 years. Banks penalize the investors for withdrawing money before the lock-in is over. This penalty is in the form of a reduction of interest rate by a certain percentage. Download App and Start Saving for Child Education What are the best investment options for risk-averse investors? The market is filled with many investment options for investors with varying risk appetites. Let's look at some of the best investment options for risk-averse investors: 1. Short-term bond fund The best alternative for investors who do not want exposure to FDs or volatile instruments. Short-term bond funds – bond funds with low maturity and a high potential to offer better returns. Debt Funds with longer maturity are subjected to interest rate risk. But short-term bonds have a lower interest rate risk as their maturity period is much lower. 2. Municipal and Corporate Bonds State and local governments and companies usually raise money by issuing bonds to the public. Bonds offer lower risk than stocks. When a company is winding up, the bondholders are given first preference in the payment and settlement order. 3. Other debt funds Other debt funds include banking and PSU Funds, ultra-short duration funds, Dynamic Bonds, etc. You could always invest a lump sum in these debt-based mutual funds and opt for a Systematic Withdrawal Plan (SWP). This would ensure that along with the returns being generated on your investments, you would also get a monthly income from these investments. This investment option is one of the best options for older people who want a monthly income. 4. Liquid funds Invest in top-rated liquid funds to avoid loss of capital with a higher degree of safety for your primary investment. Also, when the market moves up, your investment performs better and generates higher returns in line with the market. 5. Dividend growth stocks Stocks are not as safe as cash, savings, or other debt-based instruments. But they are safer than options and futures. Dividend-paying stocks are considered safer than high-growth ones as they minimize volatility, if not eliminate it. You don't depend on the value of the stock as you get a dividend as a regular income on your investment. Apart from debt-based investments, you could also apply a staggered investment approach in equity-based mutual funds for a long-time horizon. A periodically rebalanced portfolio helps you minimize your portfolio volatility and ensures efficient capture of up-market and down-market movements even with equity exposure.  Take the help of an Investment Advisor who will guide you through goal-based planning and help you choose the investments that are most suitable to your goals and objectives and your risk appetite. FAQsWhat type of investments do risk-averse investors prefer?  Risk-averse investors typically prefer conservative investments with lower volatility and more predictable returns. These may include government bonds, high-quality corporate bonds, certificates of deposit (CDs), and stable dividend-paying stocks. These options aim to preserve capital while providing modest growth, aligning with the risk tolerance of such investors.   What are 3 high-risk investments?  Three high-risk investments include investing in individual stocks of volatile and speculative companies, trading in cryptocurrencies known for their price volatility, and investing in startups or early-stage ventures that have higher failure rates. These investments offer the potential for significant returns but also carry a substantial risk of loss.   Which investment is the riskiest for investors?  Investing in highly speculative and unproven assets like cryptocurrencies, especially in lesser-known or new coins, can be among the riskiest options for investors. The volatile nature of these assets can lead to substantial financial losses due to sudden price fluctuations and lack of regulation.   Which investment has the highest return without risk?  No investment offers guaranteed high returns without any risk. Investments with potentially higher returns often come with varying degrees of risk. While some low-risk options like government bonds or savings accounts provide stability, they usually offer lower returns. Diversification and a clear understanding of risk are important for any investment strategy.  TALK TO AN EXPERT
5 types of mutual funds

5 types of mutual funds

Investing in mutual funds for your child’s education is always advisable. First of all, it is a less stressful option than investing in direct equity stocks because that requires you to have in-depth knowledge of market trends and fluctuations. Secondly, with mutual funds, there are a variety of schemes you can opt for depending on a range of factors. These factors could include the time period for which you can invest before liquidating, the amount of money you can invest, the amount you require to secure the education fund, the level of risk you can take, and so on.  When it comes to building an education fund, here are the top 5 types of mutual funds you can choose from. 1. Large-cap mutual funds The defining characteristic of large-cap equity funds is the fact that these funds invest in the top 100 Indian companies that have the highest market value. Large-cap mutual funds can bring in impressive returns if you remain invested for a long period. If you are a person who wants to avoid taking very high risks with your investments and has decided to invest early for your child’s education, this is the way to go. The average returns rate has historically beaten that of Fixed Deposits and similar investment alternatives. SIP Mutual Fund Investment Read More 2. Mid-cap mutual funds Mid-cap funds invest in Indian companies that come in the next best 250 in terms of market value. These funds are for you if you are ready to take on a higher level of risk. Justifiably, the return rates also tend to get higher. One way to satiate the risk appetite of mid-cap equity funds is to let them season for at least 7-10 years. If your child is in primary or middle school, investing in such a scheme will generate a wholesome amount of wealth by the time they are ready to pursue a college education.   How to track Mutual Funds? Read More 3. Equity-linked saving schemes  Among the various perks of investing in mutual funds is the tax deduction benefit. Equity Linked Saving Schemes are devoted to enabling investors to save taxes, as the name also indicates.  The only catch here is that it has a compulsory lock-in period of at least 3 years. The aim here is to keep you invested longer to counter the risk level. If you can spare that amount of time, then ELSS is definitely a go-to. An added benefit is the historically high level of returns.   Mutual Funds to invest in Child Education Read More 4. Low-risk options  There is this whole myth surrounding mutual funds that they only come with a high-risk factor. On the contrary, a debt fund is also a kind of mutual fund that comes with low risk, so much so that it remains undisturbed by market fluctuations.  Debt funds are still a better option than Fixed Deposits because they can generate a higher percentage of returns. So, if you are not in favor of taking high risks, debt funds are a go-to.  5. Hybrid mutual funds  If you are confused about your investment options or even hesitant about risking too much, the answer to your problems is a hybrid mutual fund. This kind of fund is a mixture of equity as well as debt.  Hybrid mutual funds bring in the best of both worlds. They tend to generate good returns at low risk. FAQs What are the different types of mutual funds? Large-cap mutual funds Mid-cap mutual funds Equity-linked saving schemes Low-risk options Hybrid mutual funds Which type of MF is best? The best type of mutual fund is the Hybrid mutual fund. Which MF gives the highest return? Equity-linked mutual funds are considered the mutual funds with the highest returns. Conclusion There will be miscellaneous financial goals you will be required to set if you are a family person. One among these might be to straighten up the roadmap to your child’s academic and career aspirations. The first step is calculating your expected expenses with the help of an education cost calculator. The calculator will help you draw your investment map to fulfill your child's aspirations. The earlier you invest, the more prepared you will be to make critical decisions as the moment arrives. DisclaimerMutual funds are subject to market risks. The previous performance of a fund is no guarantee of future success. Please reach out to an expert to know more about the schemes before investing.
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