How To Pick The Right Class of Mutual Funds?
December 23, 2012 Leave a comment
Investing in NCDs
July 4, 2011 4 Comments
A non-convertible debenture is a fixed income instrument where the issuer agrees to pay a fixed rate of interest to the investor. An NCD cannot be converted into equity of the issuing company unlike convertible debentures.NCDs are good substitutes for fixed deposits,especially company deposits.
Debentures are of two types secured and unsecured. The debentures with a “charge” on the assets of the issuer are called secured debentures. So in case of a default by the issuer, the secured debenture holders are paid by selling the assets against which the charge was created. Secured NCDs offer lower interest than their unsecured counterparts. Read more of this post
Recurring Deposits
April 24, 2011 3 Comments
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
Bank Fixed Deposits
April 4, 2011 4 Comments
A bank FD is a savings instrument where you deposit an amount with the bank for a fixed duration.You earn a fixed rate of interest on this investment. The interest rate is fixed at the time of the investment – even if interest rates change during the tenure of the FD, the interest that you earn on your FD remains fixed. A FD is also called a Term Deposit at times, as it is an investment for a pre-defined term.
All banks have their own rules on minimum deposits.Most nationalized banks will start a FD with just Rs.1000.
The tenure of a FD can be anywhere from 15 days to 10 years.The rate of interest offered on a FD depends on various parameters: the prevailing interest rates, the duration of the FD, the amount of the FD, your age, etc.Usually, the longer the tenure of the FD, the higher is the interest rate.However,when the economy has a liquidity crunch,banks do offer higher rates on short-term deposits too.They also come out with Special Term Deposits of more unusual tenures such as 555 days, 1001 days etc.Most banks offer a different rate of interest on FDs of more than a certain amount, usually Rs. 15 Lakhs.Also, most banks offer an extra 0.5% per annum to Senior Citizens.Some banks also offer different rates for Trusts and Societies. Read more of this post
Recurring Deposit Calculator
January 31, 2011 4 Comments
There is a saying in hindi ‘boondh boondh se sagar banta hai’ ie ‘Little drops of water make the mighty ocean.’
A life-time is but a sum total of seconds and our accomplishments are just a sum total of a lot of little actions.
Small sums of money saved in a recurring deposit account,tend to grow into nice lump-sums.Here is a calculator that graphically demonstrates this:http://www.religaremf.com/financial-goals.aspx .This calculator however does not allow you to input amounts less than 500 hundred rupees.Nor can you choose the frequency of compounding.Here is a calculator that allows for both:https://www.corpbanknet.com/Recurr_deposit_Calc.html.And in case you’re wondering just how small an amount will be accepted by anybody.The lowest I know of is India Post where the least monthly instalment is 10 rupees.The PORD offers 7.5% interest and is compounded quarterly.Here is a link to the PORD calculator:http://www.indiapost.gov.in/netscape/5YearsRD.html .This scheme is great for getting children to learn about saving and investment.
For any given term,banks generally offer an interest rate of one percent below fixed deposit rates for recurring deposits. Companies,such as Dewan Housing Finance ,too sometimes offer fixed deposits,though they are rarer.To find the best interest rates on offer for a given term please refer to my previous post : https://wealthymatters.com/2011/01/19/interest-rate/
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