Deposits and Investment
We see people use deposits and investment as the same. Actually it is not. Deposits for sure gives a return for the money invested with a minimum risk, whereas investments carry higher risk including the erosion of the capital invested. This is in no way to scare the reader but we need to understand the risks before investing. Again, if the inflation is higher than the interest, then the deposits do not give any real income but losses some of its value.
Skewing a little bit from the bookish definition, we can safely define deposits as keeping your money safe with a banker for a period of time for which he pays you an interest. These deposits are insured up to five lakh rupees ( In India). To give a better understanding, if you deposit an amount of ten lakhs and then the bank collapses, you will receive a maximum of 5 lakhs for your deposits and you loose the balance. Deposits normally carry a minimum risk and also a minimum return which is around 6% per annum.
Other than the banks, one can also deposit in corporate deposits like Tatas, Bajaj, and many other corporates. Here the interest may be a few points higher than the bank deposit but also the risk is slightly higher. Big and reputed companies like the Tatas are reliable but may just offer one or 1.5 % more than the bank interest. The disadvantage here is you cannot break the deposit. However, if you deposit using a demat account, some companies allow you to trade the deposits thus opening the window of liquidity during emergencies. Corporates with lower safety rating will normally offer you higher interest but you need to
If you want a better rate of return, then you have to "Invest". There are many opportunities to invest. Before you decide to invest, you need to build your risk profile, your investment period and your expected rate of returns. For this, you need to get connected with a "HONEST" Wealth advisor who can put your income in priority rather than his commission. Never make impulsive decisions or get influenced by the TV, WhatsApp and sms pushers. Read, understand, research and invest safely.
25/8/2020