Why not to Invest in Fixed Deposits?

Why not to Invest in Fixed Deposits?

Negative Post Tax Returns from Fixed Deposits

Have you ever thought that you might be losing your hard money by locking it in fixed deposits? Instead of multiplying your money, fixed deposits might be eating-up your money. Baffled!!! Let’s see how fixed deposits are not a good investment avenue as most of us thinks.

Real Rate of Return of Fixed Deposits

Most of the Institutions that are authorized by RBI to provide Fixed Deposits facilities such as banks, NBFCs, Companies, Housing Finance Companies etc. offer fixed deposits with interest rate ranging from 8.50% to 9.50% for tenure of 1 year. The interest may vary for longer term but usually lies in between the above ambit.

So, for calculation purpose we take the following figures:

Investment Amount: Rs.1 lakh

Interest Rate: 8.50% p.a. to 9.50% p.a.

Interest Compounding : Quarterly

Inflation Rate: 7.00%

Inflation rate indicates the rise in the prices from the base price. Let’s say the product you could have bought for Rs.100 few years back, would cost you Rs.107.5 at present i.e. 7.00% costlier.

This inflation rate when combines with the tax rate depletes your return tremendously even to the negative figure.

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http://www.simpleinterest.in/fixed-deposits-negative-interest-rate