How should single mothers invest and do business?

Experts advise single mothers to set up a reserve fund and save money, consider real estate and stocks, and consider business carefully.

I am a female, an office worker with a monthly salary of nearly 20 million VND. Raising a small child alone, I have accumulated more than 500 million VND.

I have no business experience but really want to invest or do business to increase my monthly income. I don't know where to start buying land, I have participated in stocks but failed, even suffered losses.

I love flowers and have dreamed of owning my own flower shop. However, my office job takes up all my time and I have no business experience. I am feeling quite confused and hope to get some expert advice.

Vnthuthuy

Buying and selling stocks at a stock exchange in District 1 (HCMC), March 2021. Photo: Quynh Tran — Buying and selling stocks at a stock exchange in District 1 (HCMC), March 2021. Photo: *Quynh Tran*

Consultant:

Surely not only you, this is a big concern of many office workers or those who have a stable source of income. Most of them are struggling to find a way to invest and do business to grow their assets better.

In your family’s case, when there is only one source of income, the need for safe investment and stable growth should be noted. However, before considering investing, you need to have risk management methods for yourself.

First, buy life insurance and additional products. As the breadwinner of the family, by preparing a life insurance contract for yourself, you have transferred the risk of losing all or part of your income to the insurance company, in case of death, disability or serious illness. The insurance premium of 5-8% of your income each year is appropriate, to ensure that you can feel more secure in life and not be pressured to pay too high a premium.

Second, set up an emergency fund. With an average income of 20 million VND per month and one dependent child, you should allocate as follows: save at least 10-20% of your income, estimated at 3 million VND per month; enjoyment expenses at 10% of your income, equivalent to 2 million VND per month; essential expenses, including insurance premiums, about 15 million VND per month.

From the current 500 million VND, you take out 50 million to set up a reserve fund. You should divide it into several small amounts and save it for a month. When necessary, you will have a reserve source to spend in case of emergency.

Regarding investment , your portfolio needs to ensure the following factors: diversify investment products, thereby optimizing profit performance; ensure liquidity, when necessary, the investment can be converted to cash while still ensuring full value; have a risk management plan.

Before choosing an investment product, you need to consider your short, medium and long-term goals. For short-term goals that need to be spent in the future, you need to invest safely, such as saving with good interest rates at banks. The capital for long-term investment needs to be clearly defined, avoiding liquidating assets earlier than expected, at the point of falling value will not achieve effective investment performance.

You can refer to two long-term investment products including real estate and stocks.

Regarding real estate , you should spend some capital to invest in this channel because they often hold good value, as long as you buy at the right value. Valuation and choosing the right area with growth potential are very important. You should seek out reputable consulting services to receive valuable advice.

Suburban areas or areas near big cities always have real estate at low prices, suitable for your current capital and good profit growth potential. You can refer to areas in Dong Nai, Binh Duong, Dak Lak, Cam Ranh, Phu Yen, My Duc, Dong Anh which have products under 300 million VND.

With a stable surplus of 3 million per month, you can consider using financial leverage when interest rates return to a stable range, to increase the opportunity for asset growth. For example, a loan of 100 million VND, interest rate of 8.5% per year, term of 15 years, each month you have to pay an average of 1.2-1.3 million VND, within the safe range.

Regarding stocks , with limited knowledge, experience and time, you should choose one of the following two investment methods: buy fund certificates at large investment funds with reputation for fund management capacity; or invest in stock accumulation by regularly buying a few selected stocks.

You can learn about these two investment methods from many different channels, or you can use a reputable stock consulting service to limit the risk of loss. You need to consider the economic cycle to choose the right time to buy and sell. Risk appetite and investment experience should also be taken into account when choosing a product. In addition, you should also allocate a small proportion of capital, from 5-10% to savings deposits to ensure liquidity for the investment portfolio.

For a flower shop business plan , you need to consider and evaluate the following factors.

First, office work takes up all your time and you have no business experience. So when you open a flower shop, who will be the manager? Can you raise capital or have a business partner? In my opinion, finding a business partner with the same interests, time and experience is not easy.

Second, you need to have a specific business plan, detailing initial capital, working capital for the store to operate, reserve capital for losses in 3-6 months; forecast customer sources, revenue and expenses, marketing plan also need to be noted. Of course, you also need knowledge of financial management.

In addition, risk management plans for flower shops also need to be established. Flowers are products with a short shelf life and are seasonal, so appropriate handling methods need to be calculated. A loss-cutting plan should also be considered. You need to plan in advance to stop operations when losses exceed the expected level or to borrow more to wait for the business to improve.

Finally, you are the main source of income for your family, and your accumulated assets are not enough. Do you believe in your business plan and your own ability to quit your job and open a flower shop? In case the business has the potential to bring profit, you should compare the profit and risk of business with investment to choose the most suitable form for your financial situation and risk appetite.

Tran Thi Mai Han

Personal Financial Planning Expert

FIDT Investment Consulting and Asset Management Company

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