Corporate FDs shine again, but should you go for them or bank fixed deposits? Check out the latest interest rates

With equity markets being in a bearish phase combined with low returns on bank deposits and debt MF schemes, corporate fixed deposits have become the latest buzzword with investors. However, should you opt for them?

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The reasonably safe FDs issued by high-quality corporates are fetching barely 1% more return than the bank fixed deposits.

Corporate fixed deposits (FDs) have become the latest buzzword with investors. Equity markets in a bearish phase combined with low returns on bank deposits and debt mutual fund schemes have contributed to their popularity. Tempted by the attractive commissions which corporates offer for marketing these deposits, many advisors have lately become very active in this market.

“Corporate FDs are bring peddled as guaranteed and secure products. The reality, however, is very different. The reasonably safe FDs issued by high-quality corporates are fetching barely 1% more return than the bank fixed deposits. Add to that their lock-in period of 3 to 5 years and you hardly have any great reason for choosing them. To overcome these advisors are pushing sub-quality FDs which offer around 2% higher than bank fixed deposit rates. What is being conveniently ignored is the probability of default after a 5-year holding period,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.

It may be noted that bank fixed deposits are considered one of the safest investment avenues, while the FDs offered by NBFCs and corporates are said to be a bit risky. Still, a large number of people prefer to go for corporate fixed deposits because they offer higher rates than those provided by bank FDs. Corporate deposits are usually issued by manufacturing firms and non banking financial companies (NBFCs), and provide higher returns than bank FDs as nothing is guaranteed to the investor in case of a default. Therefore, you should opt for AAA, AA+ or similarly rated deposits of well-established corporates only.

Also, corporate FDs should be used for investing only that money which can be spared for the duration of the deposit. All assurances of listing on NSE or other exchanges are to be taken with a pinch of salt as volumes may or may not get generated in any particular FD series.

Top FD rates offered by NBFCs

Top FD rates offered by banks

Once you have put aside the money which can safely be parked for a longer duration, go for only the very large, well-established corporates having unblemished track record of honouring their commitments and investor friendliness. “There are, however, very few such corporates and usually they don’t offer very attractive returns. But they are the only ones that qualify as investment worthy. The moment any risk gets involved, investors are better off with mutual funds or equity markets as at least they have commensurate return possibilities,” says Kapur.

https://www.financialexpress.com/money/corporate-fd-shine-bank-fixed-deposit-mahindra-finance-lic-housing-finance-bajaj-finserv-sbi-hdfc-icici-bank-invest/1367690/

Stock market correction before elections: A golden opportunity to buy Indian equities

Updated: October 26, 2018 12:03 PM

A significant correction in the stock market, leading to elections, has always resulted in awesome profits for investors in a short to medium term afterwards.

While caution is always advisable on equity investments, there is no reason for investors to be pessimistic about the future of equity markets, specially at this stage when frontline indices have already corrected around 15% from their peak.

The recent sell off in equities has pulled the stock markets down to reasonable valuations after a rather long time. Since February of 2016 when the markets went for a big correction before the Union Budget, savvy investors have been waiting for this opportunity.

As usual this much-awaited correction is being accompanied by negativity and panic from various voices. While caution is always advisable on equity investments, there is no reason for investors to be pessimistic about the future of equity markets, specially at this stage when frontline indices have already corrected around 15% from their peak. The broader market has in fact seen a much higher drawdown in prices. Economic indicators are stable, crude prices have started to cool off and corporate earnings are showing traction coming back after many years.

Many investors and market participants are fearing the big trigger of general elections which is only about 6 months away. Nothing can be further from the truth if one goes by the past data. Historical data suggests that every election has ended uncertainty, given rise to hope and resulted in indices generating smart returns in the following one year. After the constitution of BSE Sensex in 1979 as many as 10 General Elections have taken place. From the share market investors point of view, all of them were very happy events as they generated positive returns on the indices one year down the line.

Moreover, a significant correction leading to elections has always resulted in awesome profits for investors in a short to medium term afterwards. If you observe the chart given below for the last five elections, returns on equities have always been positive and impressive a year down the line.

One Year Equity Returns After The Last 5 General Elections

The outstanding elections were the ones in 2009 which generated a fabulous 81% return to investors in 2010. What made the period approaching the 2009 elections a dream opportunity to invest in equities? The answer is that the markets in 2008 were in a strong bearish phase, resulting in deep pessimism and undervaluation. Election results ended the uncertainty and improved sentiments helping investors make unimaginable returns. Now under no circumstances can 2018 be compared to 2008.

Therefore, I am not predicting anywhere close to 81% returns by 2020. However, given the fact that we have corrected before the elections, the risk-reward paradigm is certainly very favourable for long-term investors. Historical trend is not the only parameter which will influence future outcomes in the equity markets. Nevertheless a favourable historical pattern combined with attractive valuations, improving micros, stable macros, copious amounts of domestic liquidity pouring into capital markets and relatively resilient nature of the Indian economy, makes investing in equities a fascinating option at this stage.

(By Ashish Kapur, CEO, Invest Shoppe India Ltd)

(Disclaimer: The views expressed herein are the author’s. Please consult your financial advisor before making any investment.)

https://www.financialexpress.com/money/stock-market-correction-before-elections-a-golden-opportunity-to-buy-indian-equities/1361975/

10 bad financial habits every investor should overcome this Dussehra

Given the gaining importance of financial markets in our daily lives as well as in our efforts to build capital for future security, it would be a good idea to look at 10 bad financial habits which one should resolve to stay away from.

Updated: October 19, 2018 2:28 PM

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A financial plan is a must before you start your journey in the financial markets.

The Dussehra festival derives its name from the Sanskrit term Dassa Hara or removal of 10 evils from your life. Given the gaining importance of financial markets in our daily lives as well as in our efforts to build capital for future security, it would be a good idea to look at 10 bad financial habits which one should resolve to stay away from this Dussehra:

1. Investing without a plan in place

A financial plan is a must before you start your journey in the financial markets. It is imperative to have a road map of where you wish to reach and how you want to go about fulfilling your dreams. A proper tabulation of income, expenses and savings is a must for you to stay focused and not get derailed during volatile times. Hence this is the first and the most important mistake which investors should avoid.

2. Altering your asset allocation

A proper asset allocation plan is derived from the financial plan. During extreme bullish or bearish times it is often very tempting to alter these allocations due to fear or greed. This is another big mistake which investors should stay away from.

3. Regular Monitoring and rebalancing of portfolios not done

Once the allocation between different asset classes has been made, it is equally important to keep reviewing the performance of various instruments or plans invested in. Since different asset classes move in different trajectories, a regular rebalancing is a must keep the initial asset allocation in place.

4. Borrowing money to invest

Leveraged investing is the biggest single reason for investors to suffer big losses whenever the trend in any asset class reverses. So simply take a vow to always resist the temptation to buy any asset on borrowed money. This is particularly relevant for the stock markets where leverage is very easily available in the futures and options segment.

5. Being penny wise and pound foolish

Financial markets are complex and volatile. So unless you have deep knowledge, understanding and time, do not attempt to wade into them on your own. Many investors shirk from the fees which advisors charge and in trying to save some pennies lose their entire savings.

6. Ignorance about financial markets and various instruments of investments

While taking help of financial advisors is both desirable and necessary, it does not take away the importance of having some basic knowledge about financial markets. Investors well versed with capital markets are always at an advantage while dealing with their advisors and are generally able to secure a better deal from them. There are various online and offline courses available for securing a basic knowledge about capital markets.

7. Getting swayed by rumours and exaggerated hype and fears

India is fortunately a very big, stable and well managed economy. Hence the extreme projections and statements rarely work out. In bull markets you will hear exaggerated claims of profit growth and prosperity. In bear markets you will only hear about doom and gloom. Neither of the two scenarios usually play out. So, investors have to learn to ignore outlandish remarks and predictions.

8. Relying on tips

This is mainly the bane of bull market in equities. Tips from unknown sources start generating fabulous returns. Do not rely solely on tips and do your own research or take proper advise before buying any stock.

9. Ignoring risk

This is a major issue with investors in our country because of the legacy of assured, government-backed returns. Risk assessment should be an integral and important part of any investment decision.

10. Ignoring Tax impact

Whatever returns your investments generate will come to you only after taxes have been settled. Different asset classes and instruments are taxed under different clauses and subjected to different rates. So, in comparing investment options always consider the tax impact also.

Have a happy Dussehra and a great year of investing going forward!

(By Ashish Kapur, CEO, Invest Shoppe India Ltd)

https://www.financialexpress.com/money/10-bad-financial-habits-every-investor-should-overcome-this-dussehra/1354345/

Equity Musings - Playing the correction tune

FD Interest Rates Rising: Should you invest your money now or wait for the rates to go up?

Interest rates have been steadily moving higher over the last few quarters. However, should you park your money in fixed deposits now or wait for further hardening of the interest rate cycle?

Fixed deposit interest rates have been steadily moving higher over the last few quarters. With rising crude prices and falling rupee, all indications are that this trend is likely to continue for some more time. This is certainly good news for investors who are risk averse and likely to park their money in fixed deposits.

However, the important question is: Whether one should park money in fixed deposits now or wait for further hardening of the interest rate cycle?

“In my opinion, investors should go ahead and lock their money in fixed deposits with the longest possible duration right away. This of course should be the money not needed for some years and also the part in their asset allocation reserved for fixed return instruments. The reason is that in a rising interest rate scenario, banks usually give higher rates of return on longer-duration deposits,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.

He adds that in case you keep the money idle for some time hoping that rising interest rates will offer better opportunities going forward, then money which is lying will earn negligible interest for the interim period. This will more than compensate for the somewhat higher rate deposit that you get later on.

Another factor to be considered is that though interest rates are likely to move higher, but interest on deposits may not necessarily go up in a hurry. Banks usually take a lead time in raising interest rates on their deposits. Therefore, the argument for holding back your fixed deposit allocation in favour of short-term deposits holds true only when the interest rates are at the bottom or have just started moving higher.

“At present they are nowhere near the bottom and have travelled northwards for some distance already. Hence, the present time offers a good opportunity for depositors and they should take advantage of higher interest rate expectations to book deposits for durations as long as possible,” informs Kapur.

https://www.financialexpress.com/money/smart-fixed-deposit-strategy-with-latest-rising-rates-invest-now-or-later/1313158/

SIP YOUR WAY TO PROSPERITY

HOW SIP IN MUTUAL FUNDS REMAINS THE BEST WAY TO GENERATE FABULOUS RETURNS

https://www.youtube.com/watch?v=xqLx4hZLYD4&t=11s

BULL MARKET IS SCALING NEW HIGHS. VALUATIONS ARE AT AN ALL TIME HIGH. TIME TO BOOK PROFITS?

https://www.youtube.com/watch?v=tsj7wlsQflg