Women's Weekly: Can't buy me love! - Views on News from Equitymaster

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Women's Weekly: Can't buy me love!

Jun 25, 2009

They say 'Diamonds are a girl's best friend'...or are they?When you're young, with stars in your eyes and a song in your heart, you believe that love is what makes the world go round, and money don't mean much honey. But don't hate us for dissing that thought entirely. Aristotle, that old wise man we know, but fail to listen to, once said, "Youth is easily deceived because it is quick to hope." But we believe to the contrary, and support his view that "Good habits formed at youth make all the difference."

Women readers - take our poll, the Money Mojo, to gauge your economic insight and share your experiences with us!

Hopes - the similar cord between both love and stocks. How you ask? When in love you hope the object of your attention reciprocates your sentiments, and similarly with stocks - you speculate and hope that your investments gain favour. But love is a tricky game and so are stocks. Now, we can't advise you much on your love life, but we can definitely help you gain a better understanding of the stock market so you can live happily with an equity portfolio that pleases you!

"Stop right there buddy!" is what your mind is telling you, isn't it? You believe that you're still young and time is on your side, you're just starting to enjoy the financial independence of your first salary slip, plus there is mom and dad to manage your investments, so why should you start thinking about stocks and equities when you have coffee dates to keep, movie trips planned and boys to flirt with, and department stores which are calling to you?

Cash Culture
Well there is no time better than the present to invest in your future. Research has shown that there is a growing segment of women investors in the market, as more women are taking control of their financial lives (link to the previous article?). Now we've all seen Sex and the City, and seen Carrie Bradshaw and her gang of girls live life to the fullest, be it purchasing Manolo Blahniks as a wise investment or the sparkly solitaire to dazzle on your fingers; women love to buy and tend to rationalise their purchases as investments. Don't deny it - you do too!

Allow us to introduce a new word - 'Savings'! As kids we were all introduced to the little piggy bank. Now let's build that into a much larger piggy bank, which not only saves but provides us with goodies as a higher return on investment. It is a widely spread misconception that women and finance have a love-hate relationship. We love it when we get the money, but hate it when it comes to saving it, but let's prove people (ahem, men!) wrong on that account!

Why savings through equity portfolios, you ask? Simple - because when it rains, it pours! With inflation rates hitting an all-time high, storing money into banks will NOT provide you the higher rate of return you expect.

For instance, the chart below depicts returns generated by different classes of assets over a 5 year period. It is clearly visible that those who invested in stocks keeping a long term perspective in mind have added more value to their wealth, as compared to the ones who parked money in banks or in any other asset class.

Source: Trend, gold.org, nsiindia.gov.in

Stocking up on the opportunities
Here's how we can change this scenario. Imagine instead of splurging earnings from your first job, you instead invest it into building a stock portfolio. At least a part of your paycheque! Why you might ask? We all know that fashion trends change from season to season, but investing in stocks of a good company will bring you more favourable returns as it is a stable venture. Now how does that sound? Blah!!! Well this is where it gets interesting, as this is where we step in to help you make the right choices. Another reason to invest in equities is that it provides you with an opportunity to grow into new areas of business and enjoy the benefits on the returns from these investments, which include a higher average return.

Now let's address your question of why. Investments in stocks provide you with a higher rate of return as compared to when you opt for saving your money in a bank. Now this money can be allocated for the security of your future, especially in troubled times like these, where inflation can really knock the wind out of your financial planning. So if you're thinking you will only benefit from this once you have grandkids - then you're wrong! We help you choose investments which are good from a 5 to 10 years perspective...so if you're planning to save for your further studies, marriage or even a trip around the world, this will help you in that very endeavour. Is that a smile on your face, we see...?

Great! Then let us give you a small example of how this will help. Has it ever happened that you've walked into a store to buy a product and find that the price has increased, and felt dismayed that you didn't buy it when it was cheaper in price? Yup, we've all been there! Similarly with stocks. We will guide you on purchasing the stocks which will be most profitable for you in the long run.

So simple!
Let's take the case of Parachute, a product of Marico. We all purchase Parachute to revitalise our hair. Instead let's review the stock of the company behind the brand - Marico - in the graph below, and see how our pockets can enjoy the benefits of their strong performance year after year.

Source: Trend

The graph above is just an example to indicate to you how investing in stocks of good companies can bring a favourable return to your pocket as well, if you invest at the right price! Having seen the benefits of stocks, aren't you tempted to invest and build an equity portfolio for yourself? YES! And we're here to help you, every step of the way. Start by upping your finance quotient by understanding the nitty-gritty of stocks in a simple and easy to read manner, as suggested in The 5 Minute WrapUp (a free resource).

Over the next few months we plan to cover a range of issues that are important to women interested in investing, and offer solutions for the same. If there is anything in particular that you would like us to cover, write in to us!

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