These days there are often advertisements that mention the high interest rates of corporate FDs. These rates are often between 7 and 8 per cent, while the interest rates in bank FDs are as high as five and a half per cent (limited to senior citizens). In such a situation, the tendency of investors towards corporate FDs is natural. Corporate FDs pay more interest than FDs with less risk. Since corporate FDs have good ratings, investors invest in them without worrying about the risk. Interest is available from 7.5 to 8 on one-year corporate FD and 8 to 9 percent on five-year deposits.
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How to choose Corporate FD?
Rating – These corporate FDs are rated by rating agencies like ICRA, CARE and CRISIL. They have AA and AAA credit ratings depending on the risk. Ratings decrease with risk. Though corporate FDs with lower ratings may carry higher interest, they are more risk-averse.
parentage – The credibility of the group should also be taken into consideration while investing in corporate FDs. It should be seen how long the corporate FD of the company has been in existence. The standard of corporate governance also matters a lot. FDs of a company with good corporate governance and record can prove to be good in terms of returns and low risk.
Rate of interest : Investors should avoid companies that are promising unrealistic interest rates. For example, if a company is promising 10 percent interest, then one should be cautious. Make sure that these companies are listed on the stock exchange. They have good regulation. Do not make all FDs in one company. Adopt a strategy of diversification and do not opt for a long lock-in period..
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