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Simple investing tips for women
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September 02, 2005 14:40 IST

Stock markets have always been a draw for investors for their ability to generate wealth over the long-term. Many have been at it, but few can claim to have mastered the art of investing in stocks.

In most cases, investors have just not been able to appreciate the higher risks associated with stocks. Fear, greed and a short-term investment approach act as hurdles that frustrate the investor from achieving his/her investment goals.

It's not very different when it comes to women investing directly in the stock markets. We have outlined some points that women need to keep in mind while investing in the markets.

To begin with, women have to appreciate the risks associated with stocks. Simply put, investing in stocks gives rise to dual risks -- stock-specific risks and sector-specific risks (other than risks associated with the country as a whole).

An example will help you understand this better. When you decide to invest in a company like Hindustan Lever [Get Quote] for instance, you are taking a risk with the company (management, competitive strengths, ability to counter competition). You are also taking a risk with the consumer products industry (fall in profitability, changing demographics, higher taxes, rising imports) in which Hindustan Lever is operating.

Of course, there is a way to counter these risks; diversifying your equity portfolio to include more stocks and sectors is one way. This helps you diversify your investment risk, so even if something were to go wrong with a stock/industry in your portfolio, other stocks/industries should help you shore up your portfolio.

If all this sounds too complicated and time-consuming, you can consider investing in mutual funds. Mutual funds have a team of investment professionals who do what we have explained in the earlier paragraph -- diversify risks by investing across several companies and industries and tracking the same on a regular basis.

However, if you are more ambitious than that and appreciate the risk of investing directly in stock markets, then you should do so.

The good news for you is that there are resources at your disposal that should help you make this a profitable decision. Two important resources that are critical to investing directly in stock markets are quality stock research and a reliable and inexpensive stockbroker.

The first one -- research on stocks -- is the most critical input that investors need to identify before they begin investing in stock markets.

This is because even while you may have the risk appetite for equities, you still need credible, stock-market-related research that can help you make the right investment decision.

While short-listing the equity research inputs, you need to keep some points in mind.

The other important service provider for you is the stockbroker; he is the one who helps you execute the transaction over the stock exchange. The stockbroker has an important role to play so you must be careful while selecting your broker. Some points that you need to keep in mind while evaluating a stockbroker.

You would have noticed that today there are several options available to women with a risk appetite for investing directly in the stock markets. You have research on equities, you have online brokerages, and you have a lot more relevant information now that helps you take investment decisions more quickly and accurately.

In other words, the process of investing in the stock markets just got more efficient; however, the risks haven't got any lower. So investing with a certain level of prudence is necessary, as always.

To know how parents should go about securing their children's future and the role women can play in the same, download your free copy of the Money Simplified.

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