COVID-19 has knocked our doors, loud and strong and to fight it, all we need to do is stay put. But, what about our money? Does it need to stay put too? Or should it be locked safely in bank deposits? In such times, a mix & match is what will give the optimum results. Let us see how.
For risk-averse investors as well as the risk-lovers, fixed deposits or term deposits (as called in banking parlance) help strike the right balance in their investment portfolios. However, the times are different and such desperate times call for desperate measures. Right now, the main concern for most of us is to keep a good amount of cash handy. The economy is suffering a major hit due to the novel coronavirus and many are facing the consequences of it in the form of lack of resources and illiquidity.
Wait before going for long term investment options
With such uncertainty sprawling across, it may not be a wise decision to lock your savings in fixed deposits and other long term saving schemes like PPF, etc. right now. The reason is simple. These avenues serve well when their terms are completed but may lead to cash crunch before maturity and that is the last thing we require nowadays.
However, if you have already invested in fixed deposits, do not just rush to take out your money right away. FD rates are at their lowest and may fall further as the situation intensifies. It is very unlikely that the interest rates offered 2 years back will reflect anytime soon. So let the investment already in action, continue unless otherwise.
For the retirees and/or senior citizens
If you have retired recently and thus have a good amount as a gratuity with you which you were planning to invest in fixed deposits, halt to rethink your decision. Interest rates are crashing which will directly dent your interest income.
Since it is not a very favourable situation with lockdown across the country, resist the urge to lock your hard-earned money in bank deposits. There can be a sudden need for cash and to cope, it is better if your money is liquid enough to pull you out of any emergent crisis.
Select the FD sweep-in feature
If you still wish to go for FDs, pick the fixed deposit sweep-in option. Here, the fixed deposit account is linked with the depositor’s savings bank account. A limit is set, as per the depositor’s preference, e.g. Rs. 25,000. If the amount succeeds this limit, the excess amount is transferred to the FD account for a specified period, generally 1 year. This way, liquidity is not affected and safe investment is also ventured.
Owing to the points mentioned above, make wise decisions regarding your money and remember to stay home, stay safe. Once the crisis is over, you may invest actively. Till then, it is recommended to hold on and wait for the right time to invest in full swing.
8 Comments
Is it safe to invest in Indusind Bank FD @ 7% when all other banks are in the region of 5%?
IndusInd Bank is listed as a scheduled bank under the RBI and deposits up to Rs 5 lakh are covered by the DICGC (a wholly-owned subsidiary of RBI).
A 5 lakh cover by DICGC is applicable also to Company fixed deposits?
DICGC deposit insurance of up to Rs 5 lakh is only for deposits made in a bank (commercial banks as well as small finance banks). The company fixed deposits are not covered under DICGC insurance.
Ma’m i m 45 yr retire fm army. What should i do with my money. Where i invest now this situation.
Hi Jagmal,
Due to the unstable economy, the prime motive should be the security of your hard-earned money. Being said that, it is always better to keep a good mix of return-inducing and safety-backed investments in your portfolio. Therefore, consider maintaining a balance between options like fixed deposits and mutual funds. FD will offer security and returns at fixed interest rates. Mutual funds will give exposure to the market-linked returns. The market is touching new lows these days and ironically, it the best time to invest in mutual funds since the MF values are significantly low. However, to reap maximum benefits, you will need to stay invested in MF for 3-5 years. Check these articles to better understand: FD or MF – What’s Better for Me? and Best FD Rates in 2020
How is Sundaram Fixed Deposits. I have some FD with them for the last 5 months. Can I close the FD right now. Please advise.
Sundaram Finance is giving good returns as compared to big commercial banks. The bank is scheduled under RBI listing and thus, in case of a default, you will be entitled to a compensation of Rs. 5 lakh by DICGC. Hence, it is a good thing you have an FD with the NBFC.
However, if you need cash owing to Covid crisis, you may withdraw your FD prematurely now. But do so only if it’s absolutely required because the interest rates might not go up for some time.