Fixed deposit
Sunday, August 30th, 2009The higher the return, the greater the risk. This is the prime rule to be followed, when investing in a fixed deposit. A deposit offering, say, 14% interest or more annually seems a lot more attractive than a big bank’s lowly 5%. But think again.
Understand that those who offer very high rates are only doing so because savvy depositors, banks and financial institutions don’t trust them enough to lend them money like you would.
A few points to remember:
Your foremost concern should not be getting high returns. It must be about protecting your principal.
The Post Office FD scheme is absolutely safe and returns are good. They are still the best bet.
If you don’t mind some risk, choose a reputed company with at least an AA rating (high safety). If the company’s shares are listed on the stock exchange, check how it is doing. If it is battered down, then it is a bad sign. Check whether it is paying regular dividends, whether it is profitable, if both are good, then yes.
It is better to avoid traders, jewellers and other businessmen in your town who offer their own FD schemes. Many of them cheat or go bankrupt.
A safe alternative to FDs are the income schemes of mutual funds. Choose one that has been around for a while and has a good track record.
Leave a Reply