How should single mothers invest and start businesses?

Experts advise single mothers to set up a contingency fund and save money, consider real estate and stocks, but think carefully before starting a business.

I am a woman, working as an office employee with a monthly salary of nearly 20 million VND. Raising a young child alone, I have saved over 500 million VND.

I have no business experience but I really want to invest or start a business to increase my monthly income. I don't know where to start when buying land, and I've tried investing in stocks before but without success, even losing money.

I love flowers and dream of owning my own flower shop. However, my office job takes up all my time, and I also lack business experience. I'm feeling quite confused and hope to receive some expert advice.

Vnthuthuy

Buying and selling shares at a stock exchange in District 1 (Ho Chi Minh City), March 2021. Photo: Quynh Tran

Consultant:

You're probably not alone; this is a major concern for many office workers or those with stable incomes. Most are struggling to find investment and business opportunities to better grow their assets.

In your family's specific case, with only one source of income, the need for safe and stable investment growth is crucial. However, before considering any investment, you need to have risk management strategies in place.

First, purchase life insurance and supplementary products. As the breadwinner of the family, by having a life insurance policy, you transfer the risk of losing all or part of your income to the insurance company in the event of death, injury, or critical illness. A premium of 5-8% of your annual income is appropriate to ensure you can have greater peace of mind in life and avoid the pressure of paying excessively high premiums.

Secondly, establish an emergency fund. With an average monthly income of 20 million VND and one dependent (a child), you should allocate funds as follows: save at least 10-20% of your income, estimated at 3 million VND per month; spend 10% of your income on enjoyment, equivalent to 2 million VND per month; and cover essential expenses, including insurance premiums, around 15 million VND per month.

From your current 500 million VND, set aside 50 million VND as a contingency fund. You should divide this into several smaller amounts and deposit them into a monthly savings account. This will provide a readily available reserve for emergencies.

Regarding investments , your portfolio needs to ensure the following: diversification of investment products to optimize return on investment; guaranteed liquidity, allowing you to convert investments into cash when necessary while preserving their full value; and a risk management plan.

Before choosing an investment product, you need to consider your short-term, medium-term, and long-term goals. For short-term expenses that need to be covered in the future, you should invest safely, such as depositing money in savings accounts with good interest rates at banks. The capital allocated for long-term investments needs to be clearly defined to avoid liquidating assets prematurely, as a loss of value at the point of failure will not yield effective investment returns.

You can consider two long-term investment products: real estate and stocks.

Regarding real estate , you should allocate some capital to invest in this channel because properties generally hold their value well, provided you buy at the right price. Accurate valuation and choosing the right area with growth potential are crucial. You should seek advice from reputable consulting services to receive valuable guidance.

Areas on the outskirts or near major cities always have properties at lower prices, suitable for your available capital and with good profit growth potential. You can refer to areas in Dong Nai , Binh Duong, Dak Lak, Cam Ranh, Phu Yen, My Duc, and Dong Anh that have properties under 300 million VND.

With a stable monthly surplus of 3 million VND, you can consider using financial leverage when interest rates stabilize, in order to increase your chances of asset growth. For example, a loan of 100 million VND at an 8.5% annual interest rate for 15 years would require an average monthly payment of 1.2-1.3 million VND, which is within a safe range.

Regarding stocks , given your limited knowledge, experience, and time, you should choose one of the following two investment methods: buy fund certificates from large, reputable investment funds with strong fund management capabilities; or accumulate stocks by regularly buying a few selected securities.

You can learn about these two investment methods from various sources, or you can use reputable securities advisory services to minimize the risk of losses. You need to consider the economic cycle to choose the appropriate time to buy and sell. Your risk tolerance and investment experience should also be taken into account when choosing a product. In addition, you should allocate a small proportion of your capital, from 5-10%, to savings deposits to ensure liquidity for your investment portfolio.

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

Firstly, your office job takes up all your time, and you also lack business experience. So, when you open a flower shop, who will manage it? Can you raise capital or find a business partner? In my opinion, finding a business partner with similar interests, time, and experience is not easy.

Secondly, you need a specific and detailed business plan outlining initial capital, working capital for store operation, and contingency funds for potential losses in the next 3-6 months; projected customer base, revenue and expenses; and a marketing plan. Of course, you also need financial management knowledge.

In addition, risk management strategies for the flower shop need to be established. Flowers are a short-lived and seasonal product, so appropriate handling methods are necessary. A loss-cutting plan should also be considered. You need to anticipate whether you will cease operations if losses exceed expectations or borrow more money to wait for business to improve.

Ultimately, you are the primary source of income for your family, and your accumulated assets are not yet substantial. Do you have confidence in your business plan and your own abilities to quit your job and start a flower shop? If the business has the potential to be profitable, you should compare the profits and risks of business with investment to choose the most suitable option for your financial situation and risk tolerance.

Tran Thi Mai Han

Personal Financial Planning Expert

FIDT Investment Consulting and Asset Management Company

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