Saturday, October 11, 2008

Fixed Diposits: The safe Havens for the risk averse investors

As the Equity markets were on full swing last year, the good old fixed deposits and the post office schemes were loosing their sheen. But now that the markets have tumbled on their head and investors are looking for cover, it's once again time to look at these safest forms of money saving instruments.

Investors should go for bank deposits or Fixed Maturity Plans (FMP) of mutual funds which provide cushion and risk free returns during the uncertain times as now-a-days. These can be of paramount importance to senior citizens and to those with limited risk apetite.

Most Public sector banks are providing 10% p.a. for the fixed deposits (10.5% in case of senior citizens), which means you stand to earn Rs. 10,000 in a year on an FD of Rs. 100,000 pre-tax. The key aspect here is to protect your savings while keeping the returns modest.

FMPs are another way to invest in debt instuments. These are better than FD for the tax paying investors as they impose lesser tax penalty than a FD. FMPs are schemes from mutual funds that have a fixed tenure before they can be redeemed, much like the Fixed Deposits, but they provide you returns in terms of dividends that is taxed at 14% (Dividend Distribution Tax) whereas the FD is taxed at your respective income slab. 

It is always better to keep some portion of your investment portfolio in this instrument as well to keep your savings intact. 

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