If you are still investing exclusively in fixed deposits (FDs), it’s time to reconsider your investment strategy. FDs are still considered one of the safest investment options, but in a changing economy and rising inflation, they don’t always deliver superior returns. Experts believe that FDs are a good starting point for investing, but they aren’t sufficient for long-term wealth creation.
According to Ajinkya Kulkarni, CEO of Vint Wealth, fixed deposits can be a stable starting point for beginners, but those looking to build a strong asset base over the long term should divide their investments across different options.
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Government Bonds
Government bonds issued by the government are considered almost risk-free for investors. Interest rates on these bonds are often higher than those on fixed deposits. For example, RBI’s Floating Rate Savings Bonds (FRSB) currently offer an interest rate of 8.05%. Investors can invest directly through the RBI Retail Direct Scheme.
Corporate Bonds
Corporate bonds are issued by companies and offer higher interest rates than fixed deposits, ranging from 9% to 11%. However, they involve credit risk. Therefore, it’s important to check the company’s credit rating before investing. Bonds with higher ratings are relatively safe and can provide good returns over the long term.
Corporate FDs
Compared to banks, corporate FDs from NBFCs (Non-Banking Financial Companies) offer better returns. For example, AAA-rated companies like Bajaj Finserv or Shriram Finance offer interest rates up to 8.5%. However, these FDs are not government-guaranteed, so it’s important to check the company’s financial standing before investing.
Certificates of Deposit (CDs)
If you’re looking for a safe, short-term investment, Certificates of Deposit (CDs) may be a good option. They are issued by banks and financial institutions and typically have a tenure of 1 to 3 years. The interest rates on them are higher than savings accounts, making them an attractive option for short-term investors.
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Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds (SGBs), issued by the Reserve Bank of India (RBI), are linked to gold prices and offer investors a 2.5% annual interest rate. Although new issues are now closed, investors can buy and sell them on the stock exchange. This option is ideal for those who want to invest in gold but want to avoid physical gold.