Skip to main content

Fixed Deposits are Safe but Low on Returns

 


very safe but the Your money is poor returns do not justify the investment
 
In India, most investors compromise on returns and therefore, we see huge inflows into fixed deposits year-on-year. To me, fixed deposits are dud products and have many disadvantages which you must be aware of before parking your funds.

INCOME IS FULLY TAXABLE

While investing, look at post-tax returns and not the gross returns being offered to you. The investment in fixed deposits and postal schemes are subject to normal rate of tax as per your individual tax slab, which reduces your overall return. This single disadvantage should be enough to keep you away from fixed deposits. Through proper tax planning, you can save a huge amount of income tax which can be utilised for your future goals.

RETURNS CAN'T BEAT INFLATION

It has been proven that in the long run, fixed deposits post-tax cannot beat inflation. If your investments do not beat inflation, then your long-term goals like children's education or your retirement are likely to be affected.The cost of education and healthcare gallops ahead of inflation rates. If you want to beat inflation by a margin, you have to take calculated risks.

LIQUIDITY HAS ITS COSTS

Though fixed deposits are liquid and can be broken whenever you need money, liquidity in fixed deposits comes at a cost. If you break fixed deposits prematurely , then you will not get the same rate of interest mentioned in the deposit certificate. You will end up getting a lower rate.

REINVESTMENT RISK

People renew their fixed deposit with interest again and again for longer and longer durations without analysing when they will need the corpus. You must know and finalise future financial goals and invest accordingly . In a falling interest scenario, if you make a fixed deposit for three years or more, it is likely that you will get a lower rate of interest when it matures.

ONLY `1 LAKH IS INSURED

You should be aware that only `1 lakh of your savings is insured. As an investor you should also know the worst case scenario in case something untoward happens.

While it is important to have debt in your overall investment portfolio, it should be limited to only a certain percent age of your total assets. This would depend on your age, time horizon of your goal and your risk profile. Nobody can deny the importance of safety , but you should also look for and evaluate other op tions which are equally safe but can help you generate bet ter returns or can provide you better tax advantage.

So is there any al ternative to bank fixed deposits without tak ing any extra risk? The answer is yes. Public Provident Fund (PPF), the Sukanya Samridhhi Scheme and taxfree bonds are good options for the long-term. For the short-term, you can invest in ultra short-term funds or short-term debt funds or FMP schemes of mutual funds with a time horizon of 3 years plus to generate higher returns compared to fixed deposits. Arbitrage funds are another good option for period of one year plus.

The main reason why these funds are not popular is that they are market related and returns are not guaranteed like fixed deposits and postal schemes.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. IDFC Tax Advantage (ELSS) Fund

4. ICICI Prudential Long Term Equity Fund

5. Religare Tax Plan

6. Franklin India TaxShield

7. DSP BlackRock Tax Saver Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. HDFC TaxSaver

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online

Invest in Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

Popular posts from this blog

UTI MNC Fund Online

Invest in UTI MNC Fund Online   As markets have turned extremely volatile in the past few months, investing in a quality portfolio with a multi-cap focus has become the need of the hour. One such scheme which has performed well is UTI MNC Fund (launched in 1998). The scheme is managed by Swati Kulkarni. There are four main advantages of investing in the scheme.First, it sharply focuses on multi-national companies across sectors whose products are accepted not only in India but also outside India. Such diversified geographical presence helps the fund manager in maintaining a balanced portfolio. Second, in times when demand is low, such companies whose products have high acceptability, tend to do relatively better than peers. Third, the scheme follows a buy-and-hold strategy in picking companies, which provides handsome returns in the long term. Fourth, the scheme does not have a large cap bias and also has mid-cap MNCs. The scheme has beaten its benchmark indices Nifty MNC and C...
Read more

HDFC Equity Savings Fund Online

Invest HDFC Equity Savings Fund Online     HDFC Equity Savings Fund, an open-ended equity scheme, after its repositioning, has announced its maiden dividend as under:   Name of the Fund Dividend Per Unit # Record Date Face Value (per unit) HDFC Equity Savings Fund Re. 1 28 th April, 2016 Rs. 10   # The dividend will be subject to the availability of distributable surplus and may be lower, depending on the distributable surplus available on the Record Date. Pursuant to payment of dividend, the NAV of the Dividend Option(s) of the above Scheme(s) would fall to the extent of payout and statutory levy, if any. The HDFC Equity Savings Fund takes exposure to both equity and debt asset classes like a Balanced Fund, but lowers volatility from equity markets by partly hedging the equity exposure. Lower unhedged Equity exposure ensures lower volatility while the combined exposure of Equity + Arbitrage offers the tax efficiency of equity oriented funds while offering highe...
Read more

Mutual Fund Review: Franklin India Taxshield

  It maintains a diversified equity portfolio across sectors and market caps. It tends to maintain a relentless focus on long-term and ignores momentum to a large extent. So, sectors on a high metals and construction in 2007 - will not lead the fund to buy the stocks even at the cost of lower returns. In 2009, the FMCG allocation began to drop towards the year-end, despite the market rallying from March. This again shows the manger sticks to his convictions and does not get swayed by the market. In 2008, it was the third-best performing fund in its category. Instead of resorting to aggressive cash calls (averaged 5per cent), the fund increased its exposure to FMCG and healthcare. The distinct large-cap bias came to its rescue. Though in a rising market (2009), the fund was an average. The majority of the portfolio is held for long and some favourites (Infosys, L&T, Grasim Industries, RIL, Cummins India, Marico) have been around for a long period. The fund takes small position...
Read more

Balanced Funds Online

Invest Balanced Funds Online   Balanced funds typically maintain an allocation between 65-75% to equity, and the rest in debt. The minimum 65% allocation to equity is to ensure that the fund qualifies for equity taxation. Further, the discretion to vary the allocation lies with the fund manager based on his market views. As an investor, in case you would like to manage the asset allocation, you could invest in a mix equity funds or shares or ETFs , debt, etc. and rebalance the portfolio according to your views. But you should also consider the cost-benefit implications including transaction costs, taxation, etc. of frequent re-balancing. An annual review and re-balancing (if required) of one's portfolio is normally considered adequate. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 20...
Read more

How to diversify your Portfolio

  Look at your portfolio. Do you hold more than five equity funds or carry fixed deposits in more than five banks? If so, you are probably suffering from compulsive diversification disorder! In this article, we ask a fundamental question: Do you really diversify? If so, how? A la carte portfolio Diversification is a process where you hold investments that do not all decline at the same time. In an ideal world, this means you should create a portfolio that has weakly-correlated assets. So, if one investment declines significantly, another will fall only marginally or move higher. But in the globalised world, it is difficult to create such a portfolio, as all assets are often strongly correlated to each other. In such a situation, the best you can do is to create a portfolio with assets that do not all decline by a large amount at the same time. Yet, that is what happens in a global crisis in 2008. Why? In such times, all asset classes tend to move closely, as in...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now