Wealth Guide: Women from Tier 2 and Tier 3 cities jump into equity bandwagon since 2020, says a report

International Women's Day recognises and upholds women's achievements in various fields. Indian Women have broken the glass ceiling in all spheres of life, from politics to education.

However, Indian working women lag behind their male counterparts regarding investing and financial decision making.

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In a male-dominated society, India, one of the biggest equity markets globally, still falls in the bottom quartile for women participating in the stock markets.

However, there has been a surge in females investing in stocks, and mutual funds post the Covid-19 pandemic.

On this International Women's Day, let's understand the trends and patterns on how Indian millennial women invest their money.

Why are Indian Women investing in stocks and mutual funds?

The Covid-19 pandemic and the subsequent lockdown forced Indians, especially women, to juggle their family responsibilities and work life.

However, despite the economic downturn leading to job losses and pay cuts, one of the positives to emerge was the increasing participation of women in equity investments.

ClearTax saw significant growth in the number of female investors on its platform. For instance, around 24% of new investors on the ClearTax platform were females in the calendar year 2019.

It increased to nearly 30% in the calendar year 2020 and retained similar figures for the calendar year 2021.

Moreover, women accounted for 20% of the total value of investments on the ClearTax platform in the calendar year 2020. It increased to nearly 28% of the total investment value in the calendar year 2021.  

The pandemic-induced uncertainties led to a slump in the Indian real estate market while several investors ditched bank FDs in the low-interest rate regime.

It forced people to look at equity funds and stocks as an alternative even as the Sensex and Nifty 50 surged after the lockdown.

After the lockdown, many millennial women invested in equity funds and stocks to support their spouses in challenging economic conditions.

Moreover, the widespread availability of financial apps and other technology tools helped women research and pick suitable mutual funds and stocks.

Women function as investors and not traders when it comes to stocks. Hence, many millennial women invested in fundamentally-strong stocks available at a massive discount during the lockdown.

Women are steady investors in equity investments:

Studies have shown that more women chose equity investments after the lockdown in 2020. For example, female investors accounted for 22% of total investors on the ClearTax platform in the Calendar Year 2019.

However, female investors jumped to 24% of the total investors on the platform in the Calendar Year 2020.

The calendar year 2021 saw a massive jump of 40% in the number of new investors on the ClearTax platform from the previous year. Moreover, female investors currently account for 26% of the total investors on the platform.  

Women are cautious investors and follow a disciplined approach to investing. For example, women prefer to invest in equity funds through systematic investment plans (SIP).

It is a method of regularly investing small amounts in mutual funds and helps you avoid timing the stock market.

Moreover, women are less likely to stop their SIPs during a stock market correction which is the best approach to generate wealth over time.

Many women invested most of their savings in bank FDs followed by small saving schemes like PPF and post office saving schemes. However, many millennial women prefer equity investments post the lockdown.

For instance, many millennial women have shifted to direct equity funds rather than stocks because of its slow and steady approach to wealth building over time.

Women prefer diversified equity funds because of diversification across sectors and industries coupled with the facility of SIP investment.

It helps them invest small amounts rather than wait to accumulate a lump sum to commence their investments.

Women choose investments to achieve child-based goals such as education for children or accumulating a corpus for their marriage.

Investing in equity funds over the long term can generate inflation-beating returns helping them get to their financial goals.

Women from Tier 2 and Tier 3 cities jump into the equity bandwagon

Studies have shown that more women from smaller cities such as Guntur, Jammu, Nashik, Shimoga, Kochi, Rourkela, Moradabad, Durg among others picked equity investments after the lockdown in 2020.

Many of these females are millennials from tier 2 and tier 3 cities who learned the ropes of stocks and mutual fund investments during the lockdown.

Women from tier 2 and tier 3 cities used the time saved through WFH to research and understand stocks and equity funds.

Moreover, aided by many financial apps, women in smaller towns pick suitable equity investments and challenge gender stereotypes.

Are women focusing on ELSS?

Many millennial female investors have mastered the art of maximizing their tax-saving by focusing on the Equity Linked Savings Scheme (ELSS).

It is a tax-saving mutual fund qualifying for the Section 80C tax deduction up to Rs 1.5 lakh per year. Moreover, it retains the potential to offer inflation-beating returns over time along with the tax benefit to grow your wealth.

The ClearTax platform saw an increase in the number of new female investors in ELSS from 25% in the Calendar Year 2019 to around 31% in the Calendar Year 2020.

Moreover, female investors accounted for 31% of the total new investors on the platform in the Calendar Year 2021. Females currently account for 25% of total investors in ELSS on the ClearTax Platform.

Women will truly be independent only when they manage their own finances. Moreover, with females in India having a longer lifespan than males, it's vital for them to focus on women-centric financial goals.

Many women do not invest for their post-retirement years and leave this vital task to their spouses. As men focus on how long they will live post-retirement, chances are the retirement corpus may run out.

Women must focus on their financial goals themselves as they cannot depend on their spouses to fulfill this vital task.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)