Wednesday, June 22, 2011

Lesson # 20 : To Fix Deposit or Not?

India is a country where the mindset is such that the average Indian household believes in the concept of saving. There is no problem at such with saving apart from the fact that the average yearly interest on savings in the bank are roughly 3.5-4%.

When compared to absolutely no return this seems rather promising. However, if a person would fix deposit the same amount he may be able to achieve 8-10% Interest. The only problem that arises is that there is a lock in period and that premature with drawls won't give the same return. Moreover, the higher interest rates are for senior citizens or for longer periods of times.

There are of course the good old company deposits which offer as high as 12-13% interest per year but these come with a higher risk.

FD's are good for the low and moderate risk consumer who has idle cash and wants some return. You need to pay Tax Deduction at source or TDS if your return on investment in a single bank is more than 10,000 so calculate your return before investing.

An FD of 10,000 made at 9% interest for a period of 10 years yields 23,674 on maturity.

The decision lies with you...

Happy Investing

Udit Sabharwal { On behalf of Doodle inc}


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