The Need For Financial Freedom For Mothers Gaps And Opportunities -Shiv Parekh

A recent advertisement for a trading app goes by the tagline; “Ye market sab ka hai” (this market is for everyone). The assertion challenges the long held notion that investing in general is a male domain. The ‘everyone’ includes women, and women include mothers, not just working mothers but all mothers. This Mother’s Day is a good time to explore talk about the importance of investments for mothers.  

It is vital to dispel the unfounded notion that women are not suited to the risk-laden, complex and technical world of investments. As per a 2021 Women and Investing Study by Fidelity between 2011 and 2020 in the US, women’s returns were 40 basis points higher than men’s. Another study by Warwick Business School showed in 2018 among 2,800 investors, women not only outperformed the FTSE 100 over three years but also the men.

Therefore, it is not an issue of competence. It is more of a question of removing the artificial barriers that prevent participation of women in financial markets.  

In India, these issues appear to be further exacerbated and can be reversed through proper awareness of the potential and benefits of more women, especially mothers, having access freely to financial instruments.  

What are the new investment tools that can make women more prudent investors and the ways to go about it?

Mothers As Investors 
Investing is for everyone. Many argue it is essential for women, especially mothers. Investing can improve the socio-economic conditions of families as well as boost the economic potential of any nation.

A University of California-Berkeley research on investing patterns reveal that in comparison to their male counterparts, women are more risk-averse, research more diligently, are more disciplined and confident. These characteristics exhibit caution and a desire for stable returns. As the bedrock of the family, mothers seek stable income for their family and children and can ensure it through prudent investing.  

According to the research women stay invested for the long term and tends to be disciplined about their asset allocations. Therefore mothers are more likely to grow wealth steadily, generate a stable second income and enhance the economic well-being of the family.

What to Invest In?  
The question then is what are the best options to invest in? While most studies and reports focus on investing in equity markets and the stock exchange, a wide variety of investment options exist.  
For moms who are looking to invest in instruments that are relatively hassle-free, offer stable income, it is wise to look at options such as real estate.  

When it comes to real estate, women may already be earning by renting out homes or portions of their homes. Women can generate a second income through rent. However, residential properties are only one aspect of real estate and offer lower income growth than commercial real estate.  

If you go by the numbers, residential properties offer 3% rental yield on your investment, which means a Rs 50 lakh home would fetch you Rs 12,500 in rent each month. On the other hand, a commercial property worth Rs 50 lakh can provide close to three times more rent.  

The commercial real estate (CRE) sector has received an enormous fillip from more accessible instruments like REITs and fractional ownership that have made the market more accessible to retail investors.  

REIT is an investment trust that owns, manages, and operates income-producing real estate assets. It allows individual investors to make an investment in this platform and earn income in the form of rental yield and appreciation in the capital value of the property.

In addition to REITs, the other important factor that can propel commercial real estate is fractional ownership. A popular investment option in the US and Europe, fractional property investment is nascent in India. Industry experts estimate strong growth in the coming years, and India’s volume of Grade-A office spaces will reach 1 billion square feet by 2025. A considerable portion of this investment would focus on fractional ownership.

Commercial Real Estate & Benefits of Fractional Ownership 

Fractional ownership has reduced the entry cost in CRE, functioning almost like crowdfunding for real estate. These instruments have also shown how retail investors can get higher returns from investing in CRE over residential properties.  

Fractional ownership has solved one of the biggest problems in commercial property, i.e. high capital investment, thereby encouraging small investors to enter the market and making it a viable investment format for new-age investors.

Moreover, long-term capital appreciation of CRE offers a glimpse into how the real estate sector can reach its $1 trillion target by 2030.  

Towards Financial Freedom For Mothers 

As prudent investors, mothers can not only transform families but also the nation. The International Monetary Fund says that higher women’s participation in financial services would have benefits beyond reducing gender imbalance. Closing the gender gap brings stability to the banking system while boosting economic growth.  

Any day can be a mother’s day…to invest.  

The author is founder of hBits a fractional real estate platform with 35 years of experience behind it.

Disclaimer: The views expressed in the article above are those of the authors’ and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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