Bank deposit are increasing but company FDs are still giving more than 9%. Which one is good?
Company FDs are good investment options. However, just because these instruments offer higher yields, you shouldn’t look to invest all your money in them. It is important to allocate a percentage of your portfolio based on your age, goals and risk appetite.
Young people could look at higher yields for their debt portfolio by decreasing investment in bank Fixed Deposits and investing the same in a company deposit or NCDs. If you are a conservative investor who invests predominantly in bank deposits, then corporate deposits are a better option.
If you are in your 20s and aren’t looking to invest in Debt Mutual Funds, then try and allocate at least 20% of your debt portfolio towards investing in company FDs. Note that at this stage debt should form only a small percentage of your overall portfolio. With age on your side, you should look to invest more in equity than in debt.
For a middle-aged investor, company deposits are ideal instruments for locking in their savings at fixed-interest rates for an extended period of time. This way you can save for your retirement, your children’s education or marriage, or any other such goals.
Older investors will typically have higher debt in their portfolios and will also need higher returns to meet their everyday expenses over the short term. By investing in corporate deposits, retirees can get higher inflation adjusted returns.
So, the conclusion is that it would be beneficial for young investors to allocate their entire debt portfolio towards company FDs, while the seniors will need to be cautious since company deposits could be risky.
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