Corporate Fixed Deposits

With the Interest Rate situation in the Indian Debt Markets at an all time high, options for good fixed income investments like Bank Fixed Deposits & Company/Corporate Fixed Deposits are ripe for the picking. All of us know what a Bank Fixed Deposit is. But, many of us do not know what a Corporate or Company Fixed Deposit is. The purpose of this article is to explain on what they are and how they can be a useful investment option for investors.

What is a Corporate Fixed Deposit?

A deposit made by investors with corporations for a fixed time period, for a predetermined/agreed upon rate of interest is called a "Corporate Fixed Deposits".

How are they different from Bank Fixed Deposits?

By the way they work, they are extremely similar to fixed deposit schemes offered by banks. The differences are:

Bank Fixed Deposits	Corporate Fixed Deposits
Money accepted as deposits is used by the bank to grant loans to other loan customers	Money accepted as deposits is used by the company to expand its business and meet its cash requirements
The Reserve Bank of India governs all these deposit operations done by Banks	The deposits are not governed by the Reserve Bank
Rate of Interest is governed by the RBI	RBI does not govern the Rate of Interest offered by the company
Very Low to Low Risk as the RBI will intervene if they feel any unstability in the banks operations	Medium to High Risk as no one will intervene if they feel the company is unstable
Rate of Interest is lower than company FD's due to the relatively lower risk	Rate of Interest is higher than bank FD's due to the relatively high risk
If the Bank defaults, the deposit insurance scheme from the RBI will be invoked to recover customer money	If the Company defaults, the investor stands to lose his money

How does the Corporate Fixed Deposit work?

Company's/Corporations can raise capital by means of issuing Fixed Deposits to investors using the Section 58A of the Indian Companies Act. These deposits will be used by the company to fund its expansion, meet its day to day cash requirements etc. This is just like a regular loan that we may take from any financial institution. The company will make periodic Interest Payment (Usually Once a Year) to all the investors in return for the deposit they made with them. At the end of the deposit tenure the company will re-pay the money deposited to all the investors.

A point to note here is that, these deposits are unsecured. If the company is unable to perform as expected or starts making losses, the interest payments may be skipped and in the worst case, if the company declares bankruptcy, the whole deposited money may be lost.

This is exactly the reason why company fixed deposits offer a higher rate of interest (Usually 2-3% more than Bank FD's) to attract high risk investors who want better returns that what is offered by Banks.

How are Interest Payments made to the Investors?

The Interest payment is usually made depending upon the Investors choice. They can opt for Monthly or Quarterly or Half-Yearly or Annual Interest Payments. The company will declare upfront the mode of interest payment. It will either be through cheques mailed out the investors address or through ECS into the investors bank account.

Am I Saying that Investing in Corporate FDs is a Bad Idea?

In this article, you might have seen multiple references to these deposits being unsecured and that chances of losing the money are high if the company goes broke. If this had made you think that Investing in them is a bad idea, then you are wrong.

The point here is that, not all company's are mismanaged or go broke. There are numerous well-performing company's that raise capital by using this FD option. They do it because, it is usually cheaper than borrowing from banks. Banks usually charge a much higher interest rate than what these company's would pay on their corporate FD schemes. So, if the company is a well managed one, with a reputation of stable business and profit earning, then there is a very good probability that you will receive your interest payouts on time and that the company will meet its commitment to repay your deposit at the end of the deposit tenure.

Verdict:

Investing in Corporate FD's is a good idea if the company is good and has a history of good performance. In the subsequent posts, we will take a look at the good Corporate FD schemes that you can invest now and how to identify a good Corporate FD scheme from one that is an impending disaster

Happy Investing!!!

Where to Invest our Money Now?

With Stock Markets reeling under a lot of volatility, and the Indian Rupee depreciating against most major foreign currencies (esp against the US and Singapore Dollars) the outlook for the Indian Markets is not so green right now. As of now, the big question that is in peoples minds is “Where can I Invest my Money Now?“ Should I take a risk with the stock market or should I go for bank deposits? If you are someone who has had these questions pop-up in your mind over the past few months, this article is just for you...

Before We Begin

Before we begin answering the question, where to invest our money, we have to decide a few key aspects...

1. Decide How Much You Can Invest
2. Decide When you want the Money Back

Rationale: With the knowledge of when you want the money back, a wise decision can be taken

Point No. 1 is just a technicality to try to understand how much money we have to invest. It is not going to affect our investment decision much. But, Point No. 2 is going to be the key player in our decision.

The rest of this article is going to be about where to invest based on the timeframe as to when you want your money back. The details are split into four sections:

1. Ultra Short-Term (Less than 6 months)
2. Short-Term (6 months to 1 year)
3. Medium-Term (1 to 3 years)
4. Long-Term (More than 3 years)

Ultra Short-Term (Less than 6 months)

When you need your money back in the immediate future i.e., within the next 6 months, safety and security of the money invested takes highest priority. Lets say, you have some money that you have saved up for your Son’s Engineering College Admission in June of 2012 (It is January 2012 now) the most important consideration for you is, will the money be available for me when it is time to pay my Son’s college admission and fees. So, at such a scenario, investing in the stock market would be suicide and you may or may not be able to pay his fees using this money. So, the best Investment Options for an individual who plans on using the invested funds in the near future are:
1. Liquid Cash in your Savings Account – This is a wise choice if you need the money in a time period of less than 3 months. The whole hassle of opening a fixed deposit, breaking it a few days before you need the money, paying a penalty for premature withdrawal etc can be avoided. You can withdraw the money anytime you want. The Rate of Interest you earn is only going to be around 4%.

Justification: Even though your money is earning only 4% interest, your money is fully secure and available whenever you need it. So, this is the best choice for someone who needs cash in the immediate future.

2. Bank Fixed Deposits – This is a wise choice if you need the money in a time period of anywhere between 3 to 6 months. Your Money does not stay idle. With the current high interest rates offered by banks on fixed deposits, your money is going to earn a good income eventhough the duration is only around 6 months or lesser.

Justification: Your money is going to be safe because, banks in India are very safe and strictly regulated by the RBI. Moreover, your deposits will earn an interest of around 6-8% which is very good considering the kind of returns the stock market has offered over the past few years.

Short term (6 months to 1 year)

When you need your money in a time duration of between 6 months to 1 year, your choices of investment are a bit more diverse because, apart from capital preservation, the rate of returns the instrument earns is going to be a key criteria (unlike the ultra short-term where capital preservation was our main goal)

1. Fixed Income/Debt/Bond Mutual Funds – These days, there are a whole bunch of Debt and fixed income MF’s that are available in our market. These are MF’s that invest only on debt instruments (like bonds) and so, the principal invested is almost 100% safe. Moreover, since they invest in bonds from Corporations & other large organizations, the rate of returns is going to be greater than what is offered by Bank Fixed Deposits of equal tenure.

Justification: Even though these MF’s invest only in Fixed Income/Debt Instruments, default risk is a very real probability. But, the chances of that are less than 1 or 2%. Since as an investor you are bearing this 1 or 2% risk, the returns are usually an equivalent 1 to 2% higher than what Fixed Deposits yield us. So, this is a good choice for people planning to invest their money for a duration of between 6 to 12 months.

To know more about Debt Mutual Funds Click Here

2. Bank Fixed Deposits – The rates of interest offered by banks these days for deposits between 6 to 12 months timeframe are in the range of 6 to 10%. To add on, the deposits are 100% safe.

Justification: Safety, combined with good returns of around 8% makes these a very good choice. This is for the totally risk averse investor. If you are someone willing to take a small risk for a better reward, then option no.1 would be a better choice.

Medium term (1-3 years)

When you need money in a time duration of between 1 to 3 years, you have the opportunity to take a decent amount of risk to take advantage of the good returns offered by the Stock Market. Even if the markets remain volatile in the short term, they will recover and once they do, the returns will definitely be better than the other asset families.

1. Balanced Mutual Funds – These are Mutual Funds that Invest in both Debt and Equity Instruments. Well managed balanced funds move their assets between equities and debt to provide the best possible returns to the investor. They usually invest around 60% of their assets in debt instruments to provide capital preservation and invest the remaining 40% in the equity markets to provide far better returns than traditional debt instruments like bank deposits or debt MF’s.

Justification: Though Balanced MF’s have lost some value (In NAV) over the past year due to the turbulent markets, they havent done as bad as the Equity Diversified category of funds. This is because of the healthy allocation to debt instruments. So, if you are an investor with a medium term timeframe of 1 to 3 years, these would be a good bet. Even if the markets remain turbulent in the near-time future, it will definitely recover over the next few years and you can reap the benefits of the equity allocation of such funds.

Trivia: Last month we had taken a look at one of the best Balanced Mutual Funds in India "HDFC Prudence Mutual Fund". To know more about this fund Click Here

Long term (3 years or more)

When you are planning for a long term investment, you have the opportunity to take calculated risks to take advantage of the good returns offered by the Stock Market & Other Asset Classes. Even if the markets remain volatile in the short term, they will recover and once they do, the returns will definitely be better than the other asset families.

1. Diversified Equity Funds – These are Mutual Funds that invest directly in the Equity/Stock Markets. They invest predominantly in blue-chip or large cap stocks and also select a few good mid-cap or small-cap company’s to provide the best possible returns to the investor.

Justification: Diversified Equity MF’s have taken a significant beating over the past year due to the volatility in the stock markets. Experts suggest that, this is the best time to enter the market due to the cheap valuations. Fund Managers of well managed funds are using this opportunity to rejig their portfolio to best suit the investors. Considering our timeframe of 3 years or more, equities are our best bet and as always, no other asset class has outperformed equities on overall returns over the past decade. So, investing in Equities is a wise choice for the long-term investor.

2. Gold – Gold, the shining yellow metal has been increasing in value for the past few years and is expected to do so in the future as well. Though, the price may be volatile in the short term, overall the price of gold will only go upwards because of the supply-demand parity. So, gold too would be a good addition to your long term investment portfolio

Tip: If you decide on investing in Mutual Funds (Balanced or Equity Diversified) Systematic Investment Plans (SIP) are the best way to go. Since the markets are very volatile these days, investing regularly helps average out the high’s and low’s of the market and get the best returns

There have been numerous articles in my blog about investments & forming an investment portfolio. You can read them by clicking here

Happy Investing!!!

Bank Fixed Deposit Interest Rates in India - November 2011

With the stock market being as volatile as it is, investors are looking for safer investment options that guarantee both the principle and the interest. At this Juncture, Fixed Deposits are the best Investment option for the Risk Averse Investor. With Banks in India offering more than 9% per annum (Even 10% in some cases) on Fixed Deposits, this is the best time to invest in Fixed Deposits if you have surplus cash.

Below are the Best Interest Rates available from various Banks in India.

Note: This is not a consolidated List. Only the Timeframes where the Bank is offering the best Rate of Interest is chosen. For the full list, please visit the respective bank websites.


Nationalized Banks:

1. State Bank of India

Time Period	Rate of Interest
91 days to 179 days	7.25%
241 days to Less than 1 year	7.75%
> 1 year	9.25%

Extra 0.5% for Senior Citizens.

2. Punjab National Bank

Time Period	Rate of Interest
180 days to Less than 1 year	8%
1 year	9.25%
555 days	9.3%
777 days	9.35%
1000 days	9.4%

Extra 0.5% for Senior Citizens.

3. Indian Bank

Time Period	Rate of Interest
181 days to Less than 9 months	7.25%
9 months to Less than 1 year	9.25%
1 to 3 years	9.5%

Extra 0.75% for Senior Citizens.

4. Indian Overseas Bank

Time Period	Rate of Interest
91 days to 120 days	7.75%
180 days to 269 days	8%
270 days to 332 days	8.5%
1 year to 443 days	9.25%

Extra 0.75% for Senior Citizens.

5. IDBI Bank

Time Period	Rate of Interest
46 days to 90 days	7%
91 days to less than 6 months	8%
6 months to 269 days	9%
270 days to 1 year	9.25%
1 year to 499 days	9.5%

Extra 0.75% for Senior Citizens.

6. Bank of Baroda

Time Period	Rate of Interest
1 year to 443 days	9.25%
444 days	9.35%

Extra 0.75% for Senior Citizens.

Private Banks:

1. ICICI Bank

Time Period	Rate of Interest
190 days	7.75%
390 days	9.25%
590 days	9.25%

Extra 0.5% for Senior Citizens.

2. HDFC Bank

Time Period	Rate of Interest
6 months 16 days	7.75%
9 month 16 days	8%
1 year 1 day to 1 year 15 days	9%
1 year 16 days	9.25%

Extra 0.5% for Senior Citizens.

3. Karur Vysya Bank

Time Period	Rate of Interest
31 days to 270 days	7.65%
271 days to Less than 1 year	8.5%
1 year to 3 years	9.75%

Extra 0.5% for Senior Citizens.

4. Axis Bank

Time Period	Rate of Interest
3 to 6 months	7%
6 months to Less than 1 year	7.5%
1 year 1 day to 14 months	9.4%

Extra 0.75% to 1% for Senior Citizens depending on time period chosen.

5. Kotak Mahindra Bank

Time Period	Rate of Interest
91 days to 180 days	7.75%
181 days to 270 days	8.75%
271 days to less than 1 year	9.5%
1 year to 389 days	9.5%

Extra 0.5% for Senior Citizens.

Pick of the Lot:

Short Term (Approximately around 6 months)

Bank Name	Rate of Interest	Deposit Period
HDFC Bank	7.75%	6 month 16 days
ICICI Bank	7.75%	190 days
Punjab National Bank	8%	180 days to Less than 1 year
State Bank of India	7.25%	91 days to 179 days
Indian Bank	7.75%	181 days to 9 months
Axis Bank	7.5%	6 months to Less than 1 year
Karur Vysya Bank	7.65%	31 days to 270 days
Indian Overseas Bank	7.75%	91 days to 120 days
IDBI Bank	8%	91 days to Less than 6 months
Kotak Mahindra Bank	7.75%	91 days t0 180 days

Long Term (1 year or More)

Bank Name	Rate of Interest	Deposit Period
HDFC Bank	9.25%	1 year 16 days
ICICI Bank	9.25%	390 days
Punjab National Bank	9.35%	777 days
State Bank of India	9.25%	Greater than 1 year
Indian Bank	9.5%	1 to 3 years
Axis Bank	9.4%	1 year to 14 months
Karur Vysya Bank	9.75%	1 to 3 years
Indian Overseas Bank	9.25%	444 days
Bank or Baroda	9.35%	444 days
IDBI Bank	9.5%	500 days
Kotak Mahindra Bank	9.5%	1 year to 389 days

Important Disclaimer: The Article above is not an investment advise. All Interest Rate numbers were picked up from the respective bank websites as of November 2011. Banks may change their rates from time to time and the author does not guarantee accuracy of the dates if the Banks wish to change their rates.

Happy Depositing!!!

Smart Strategies to make money in falling markets

With the stock markets world over being as volatile as it is now, investors are looking for smarter ways to make money even in falling markets. If you are one of those investors, then this post is for you.

Although we believe it's probably best during volatile markets to maintain a balanced portfolio or stick to debt instruments until the markets get on the Bull again, there are potential ways to make some money even in such volatile/falling markets.

Note: Some of these strategies may be extremely risky for novice investors and you are hereby requested to do your research and invest only on your own risk.

Some Smart Stretegies:

1. Switch to cash or currencies

The easiest approach of all is to switch to Fixed Deposits. Banks in India are offering around 9% or more these days plus it is safe and secure. Another option would be to park the surplus cash in your bank account until the market stabilizes.

This is probably the best approach for Risk-Averse/Novice Investors. However, it is not a wise idea to let cash lay idle in your bank account. Instead a Fixed Deposit will atleast give you decent returns.

2. Switch to gold/commodities

Gold, other precious metals, oil and soft commdities (such as wheat futures) can be safe havens or even highly profitable in times of crisis. Gold is probably the best bet for investors who are not too sure about investing in the commodity markets. Gold has been one of the best performing asset classes of all times and would be a good addition to your portfolio.

To learn more about Historic Demand for Gold and the Historic Price Movement of Gold in the past 2 decades, you can Click Here

To learn more about Investing in Gold and other precious metals, you can Click Here

To learn more about Gold as an Investment, you can Click Here

This would be a nice option for Risk-Averse/Novice Investors. However, a point to note is that the price of gold too can fall and can cause losses in the short term. However, as a whole the price of Gold will always go up and you can expect decent profits in long term.

3. Buy when stocks are cheap or Average out your prices

Stock Market crashes can create great buy opportunities for the smart investor. Stocks of even the top performing companies fall when the market crashes. Though, they are company's with solid fundamentals and good profit making capability, their stocks fell just because of the negative investor sentiment. Such times can be a nice time to enter the market and buy stocks that have a proven track record. If you are someone who bought shares of a good company sometime back and are worrying because the market is bottoming out, you can go ahead and average out your costs by buying more of those stocks. This way, your average investment per share will come down and you can make better profits when the market rebounds.

Buying shares when the market is down is a risky strategy and you may lose your investment as well. So, you need to be cautious while buying at such troubled times. If you are uncertain about which stocks to pick, the best approach would be to pick out the best performing Equity Mutual Funds and let the Fund Manager do the thinking.

4. Do Short Selling

Short Selling is a Derivative Strategy that you can use to make profit when stock prices fall. Let us look at a Scenario.

Step 1: You expect that Shares of ICICI Bank are going to fall next week once their quarterly results are out. Lets say the current share price is Rs. 1000 per share.
Step 2: You Initiate a Short Sell request for 10 shares of ICICI in the stock market (You are selling 10 shares that you do not own). You will get Rs. 10,000/- for the sale transaction under the obligation that you will buy it back after some days.
Step 3: Lucky for you, the price of ICICI has indeed gone down after 2 weeks. It is trading at Rs. 900 per share.
Step 4: Now, you buy the same 10 shares of ICICI for Rs. 9000/- and settle the trade with your broker. This is what happens when you finish the buy
1. You literally bought back the 10 shares you did not own and now your broker has no fake shares on your name
2. You pay your broker the price @ Rs. 900 per share which is Rs. 9000 and complete the trade
Step 5: Since you fulfilled your obligation of buying back the 10 shares the Short-Sale transaction is complete. You got Rs. 10000 for the sale and paid Rs. 9000 for the purchase two weeks later, leaving you with a profit of Rs. 1000

In Short "You successfully sold shares you didn't own, then bought the shares back at a cheaper price, thereby pocketing a profit."

On the contrary, if ICICI had gone up to Rs. 1200 after 2 weeks, you still would have to buy back those 10 imaginary shares you sold thereby paying Rs. 12,000 to your trader which essentially means you are losing Rs. 2000 from your pocket. It would have been better if you had just purchased ICICI shares on day one instead of placing a Short-Sell order.

A point to note here is that, your trader will expect some Margin Requirements in order to fulfill such trades and the above is just a hypothetical example with no strings attached.

This is an extremely risky proposition. Novice or Risk Averse investors should stay away from such transactions because if the price of the shares go up, you still would have to buy back the shares at a later point in time and you will end up losing money instead of earning it

5. Buy Puts

A Put option (sometimes simply called a "Put") is a financial contract between two parties, the buyer and the writer (seller) of the option. The Put allows the buyer the right but not the obligation to sell a share to the writer of the option at a certain time for a certain price (the strike price). The writer has the obligation to purchase the underlying asset at that strike price, if the buyer exercises the option. The buyer pays a fee (called a premium) for this right. The Put buyer either believes it's likely the price of the underlying asset will fall by the exercise date, or hopes to protect a long position in the asset. The advantage of buying a put over shorting the asset is that the risk is limited to the premium.

Unlike the short-sell scenario just explained in the previous paragraph, you are not expected to buy the shares in case the prices go up. Instead you just let the Put-Contract expire and limit your losses to the premium you paid. However, if the price of the shares fall, you can purchase them and try to make a profit.

This again is an extremely risky proposition. Novice or Risk Averse investors should stay away from such transactions

Even if the stock market is volatile, there are options for the smart investor to make money. However, it carries a lot of risk and Novice Investors must stay away from such complicated Derivative products unless they are willing to bear the losses that may arise.

Happy Investing!!!

Safe Investment Havens

At troubled times like these, safety of the investment is of prime concern to most investors across the country. When we check safety as a primary criterion, we may have to compromise on the return on investment (ROI)
Safe investments (Like the ones we are going to see in this article) would give you returns of around 8% per annum with a full 100% guarantee on the invested amount.
Even in such difficult times, I would suggest equities for investment because they would outpace the returns of all other asset classes always, considering the interests of the conservative investor is also important. This article is for the conservative investor for whom the motto “Safety First” is etched on stone and they would never compromise on that.

Let us have a look at some of these investment options and their strengths which would tempt us to choose them to park our funds.

1. Bank Fixed Deposits
2. Post Office Time Deposits
3. Kisan Vikas Patra
4. National Savings Certificate
5. Post Office – Monthly Income Scheme (POMIS)
6. Post Office – Recurring Deposits (PORD)
7. Public Provident Fund (PPF)
8. Senior Citizen Savings Scheme

Bank Fixed Deposits:

Bank FDs have been one of the most prominent saving instruments for the average Indian citizen. If you happen to ask a person who is of our father’s age (Assuming you are in your 20’s or 30’s) one of the first choices for saving money would be a Bank Fixed Deposit. These are very safe investments where the bank is bound to repay our money along with interest at maturity or even before maturity if you wish to close the account.

Positives:

1. 100% safe
2. Tenure ranging from one month to 5 years is available
3. Rate of Interest ranging from 5% to 9% (An extra 0.5% for senior citizens)
4. Tax benefits on investment upto Rs. 1 lac for 5 year tax saving deposits
5. No upper limit on investment

Negatives:
1. Interest earned on the deposit is fully taxable
2. Penalty charges may be levied if you wish to close your deposit prematurely (i.e., before the scheduled maturity date)

Post Office Time Deposits:

Post office time deposits are similar to Bank fixed deposits with one major difference. You open the deposit account in a post office instead of a bank.

Positives:
1. 100% safe
2. Tenure ranging from 1 to 5 years is available
3. No upper limit on investment
4. Rate of interest ranging from 6.25% to 7.5% (Compounded Quarterly)

Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits

Kisan Vikas Patra
KVP is similar to the Post office Time Deposits. These are close ended deposit products launched by Indian Post office where our money would double in 8 years and 7 months. Assuming you invest 1 lac today in KVP, your money would be worth 2 lacs at the end of 8 years and 7 months.

Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8.41% (Accumulated Interest is compounded yearly and paid on maturity along with our principal)

Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits

National Savings Certificate:

NSC certificates are certificates of deposits issued by the government of India. Any Indian can deposit cash in NSC. This money would be used by the government for its cash needs.

Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8% (Compounded half yearly)
4. Tax benefits. Investments upto Rs. 1 lac are exempt from income tax under sec 80C
5. Investment tenure is 6 years

Negatives:
1. Interest earned on the deposit is fully taxable

Post Office Monthly Income Scheme (POMIS)

The POMIS is a scheme launched by the Indian post office where an investor can invest a lumpsum amount on which the interest would be paid out monthly. This is used as a regular source of income for many senior citizens.

Positives:
1. 100% safe
2. Rate of interest is 8% and is paid monthly
3. Investment tenure is 6 years

Negatives:
1. Interest earned is fully taxable
2. Upper limit on investment is Rs. 4.5 lacs for individual accounts and Rs. 9 lacs for joint accounts

Post Office Recurring Deposit (PORD)

The PORD is a recurring deposit scheme that is launched by the Indian post office. In this scheme, an investor can deposit a small sum of money on a monthly basis and the amount would be paid on maturity as a lump sum along with interest.

Positives:
1. 100% safe
2. Rate of interest is 7.5% (Compounded Quarterly)
3. No upper limit on investment
4. Tenure is 5 years

Negatives:
1. Interest earned is fully taxable

Public Provident Fund (PPF)

PPF is similar to the normal Provident Fund with the only difference being, anyone can open a PPF account by visiting the nearest State Bank of India branch. PPF is also managed by the government of India. Once we open a PPF account we can deposit cash in our PPF account anytime.

Positives:
1. 100% safe
2. Rate of Interest is 8% (Compounded yearly)
3. Investment tenure is 15 years
4. Tax benefits under sec 80C for investments upto Rs. 70,000/-
5. Returns on investment are tax free

Negatives:
1. One can invest only Rs. 70,000/- per year
2. Must invest atleast Rs. 500/- every year to keep the account active.

Senior Citizens Saving Scheme

Senior Citizens savings scheme is a special deposit scheme meant for senior citizens (Individuals who are over 60 years of age) You can invest in this scheme through either post offices or through nationalized banks like SBI.

Positives:
1. 100% safe
2. Rate of Interest is 9% per annum (compounded quarterly)
3. Tax benefits on investments upto Rs. 1 lac under sec 80C
4. Investment tenure is 5 years

Negatives:
1. Upper limit on investment is Rs. 15 lacs
2. Interest earned on investment is fully taxable.

Recommendation:
As the options discussed above are all 100% safe they are a must have in ones investment portfolio. Based on your age, the share of these investments in your portfolio would vary. As a rule of the thumb, you must have a % of your investments equaling your age in these instruments. Assuming you are 30 years old, 30% of your investments should be in such options and the remaining 70% in other options like equities, real estate, gold etc.

Happy Investing!!!