Look Beyond “Safe” Fixed Deposits for a Strong Financial Portfolio
Personal financial planning is a crucial journey every
one of us has to take if we are serious about meeting our life goals. But one
misunderstanding is common among even those who are serious about financial
planning. Most of us believe that
financial planning is all about choosing the right selection of fixed deposits.
Yes, fixed deposits are an important part of everyone’s financial planning journey,
but these are not the only options. So why are these options not always enough?
Let’s see!
Fixed Deposits: conservative investment options
fixed deposits top the chart for being some of the
most conservative investment options. fixed deposits are not affected much by
the fluctuating market. However, both these options are not really on top of your
financial planner’s list. The biggest drawback of fixed deposits is that they
have low returns and low-interest rates, with an average of about 6 to 7%. In
addition, every time RBI predicts possibilities of increasing inflation, the
interest rates will also see a corresponding decrease. This rigid approach,
including penalties for withdrawing within tenure, makes fixed deposits a not
so popular investment option if you want to see your money grow.
Alternate options to FD
Mutual funds
One of the best alternatives to fixed deposits is the
mutual fund option. Yes, it comes with the warning that these investments are
subject to market risks, which is what makes it a scary option to safe
investment seekers. However, the returns from this option can be great if you
make the right choice in mitigating the risks. They offer higher liquidity as
compared to fixed deposits and can potentially give you high inflation-adjusted
returns. You can also exit the plan without carrying the load of penalty. So,
with the help of an expert and trusted personal financial advisor with
extensive knowhow of the India market, you can definitely consider mutual funds
(equity or debt) as an investment option in today’s improving economic
scenario.
Direct equity
This is the ever-popular shares option –
super-volatile and zero guarantee on returns. Choosing the right stock,
investing the right amount, watching the market like a hawk, and planning your
exit can all be stressful. Yet, this option quite popular given the incredible
returns you can make if you are shrewd about mitigating the risks. If not,
steer clear of this option
National pension schemes
This option is perfect for
investing, if you are looking for a post-retirement plan. With many options to
choose from (from equity to government funds) you can make the right decision
with the help of some strong financial advice from an expert with
a strong sense of the market.
Company deposits
Company deposits too are high-risk investments since
they do not guarantee the investor with any returns if there is any default.
These are an option used by companies to raise funds and hence these investment
options are definitely insecure. However, this risk means high interest rates;
hence this means you will need the guidance of an expert financial advisory
service before you make your decision.
Other options
You have many other short- and long-term investment options
including real estate and the ever-popular precious metals such as gold, public
provident fund, taxable bonds from RBI, saving schemes for senior citizens, and
definitely, insurances. We will review each of these options in our later
articles. A well-guided, risk-mitigated calculative financial risk can help you
reap maximum benefits. Professional help in the form of a trusted and expert
financial advisor can help you draft a financial plan including a healthy mix
of different types of investments and savings.
Always remember that every individual or family’s life
goals and journeys are unique. Hence you can plan your finances only after you
first understand your journey, financial goals, current net worth, and specific
investment options that are a best fit for you.
Connect with
Prognoadvisor.com to understand what your financial investment options are and
how you can make your money grow with confidence.
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