RD | wealthymatters

Recurring Deposits

April 24, 2011 3 Comments

wealthymatters.com A Recurring Deposit(RD) is a type of term deposit account opened by a person/persons with a bank or a post office wherein the investor or investors deposit a fixed amount of money every month for a fixed tenure . This scheme is meant for investors who want to deposit a fixed amount every month, in order to get a lump sum at the end of the tenure. The interest on RDs normally offered by banks is one percent below Fixed Deposit(FD) rates compounded quarterly.Often there is nothing extra by way of interest offered for senior citizens.Otherwise the rules for operating a RD account are the same as that for a FD account.The PO offers a fixed 7.5% interest compounded quarterly for a 5 year term.

RDs are great for people to develop the savings habit.It is especially useful to teach kids to save especially the Post Office Recurring Deposit (PORD) which has a minimum deposit of 10 rupees per month.Often banks package RDs as schemes to become or to make your child a lakhpati,millionaire etc or as schemes to build the down-payment on a house or vehicle. Read more of this post

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Economic Life,Sinking Funds,Amortization and RDs

April 22, 2011 6 Comments

Having an abundance of material resources and never having to hustle round in the last-minute to find the funds to do what we want to do is a good indicator of wealth.

I first came across the concepts of economic life,sinking fund and amortization as an engineering student.Adapted to our personal finances and business these concepts help us to always have enough money at the right time.

Economic life , a.k.a useful life is the period of actual usefulness of an asset.Beyond this period it is cheaper to replace or scrap the asset than to continue maintaining it.

A sinking fund is a reserve created by periodically setting aside certain sums in an account to replace an asset in future or to repay a liability.

Amortization refers to spreading an asset’s replacement cost over it’s economic/useful life. Read more of this post

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Smart Things To Do When The Yield Curve is Inverted

April 10, 2011 3 Comments

1. Banks normally come up with special term deposits with high interest rates.Now is a great time to book some fixed deposits.

2.Newly issued bonds tend to have higher coupon rates or deeper discounts.Now might be a good time to add some to your portfolio.

3.Older long term bonds you might have been coveting for a while might be available cheaper or at deeper discounts now.Maybe you should buy some now.

4.Stock markets might not be so buoyant now so investing short-term funds in bank term deposits which are offering equity like returns is a good idea.

5.Good stocks that you plan on holding for the long-term might be available cheaper.Why not buy them now?

6.Tax-saving FDs are likely to be very good options now.Do the math to check your pre-tax returns to see just how good they are. Read more of this post