Investing in financial instruments like corporate fixed deposits (FDs), gold mutual funds or ETFs, and various bonds or debentures can be an effective way to diversify your investment portfolio. Below is an overview of these options, including their features, interest rates, and terms.
Corporate Fixed Deposits in India (2024-2025)
Corporate FDs are term deposits offered by non-banking financial companies (NBFCs) and other financial institutions. They often provide higher interest rates compared to traditional bank FDs but come with varying degrees of risk based on the issuing company’s creditworthiness.
Here are some notable corporate FDs:
Institution | Credit Rating | Tenure | Interest Rate (per annum) |
LIC Housing Finance Ltd | CRISIL FAAA | 1-5 years | 7.0% – 7.75% |
Mahindra Finance | CRISIL FAAA | 1-5 years | 7.10% – 8.10% |
Shriram Finance | ICRA MAA+ | 1-5 years | 7.75% – 9 % |
Comparison with Bank Fixed Deposits
- Interest Rates: Corporate FDs typically offer higher interest rates than bank FDs. For instance, while a leading bank might offer around 6% per annum for a 5-year FD, corporate FDs can offer rates exceeding 8% per annum.
- Risk Factor: Bank FDs are generally considered safer due to regulatory oversight and deposit insurance up to ₹5 lakh. Corporate FDs carry higher risk, which is reflected in their credit ratings. It’s essential to assess the issuing company’s financial health before investing.
Premature Withdrawal Terms
- LIC Housing Finance Ltd: Allows premature withdrawal with a penalty of 2% on the contracted interest rate.
- Shriram Finance: Offers premature withdrawal options, though specific terms and penalties may vary. It’s advisable to consult the company’s official resources or customer service for detailed information.
Gold Mutual Funds and Gold ETFs
Investing in gold can be achieved through mutual funds and ETFs, offering a convenient alternative to holding physical gold.
- Gold ETFs: These are exchange-traded funds that aim to track the domestic price of physical gold. Each unit typically represents 1 gram of gold and is backed by physical gold of high purity. They are traded on stock exchanges like the NSE and BSE, providing liquidity and ease of transaction.
- Gold Mutual Funds: These funds invest in Gold ETFs and provide the added advantage of not having to worry about storage costs, safety, and liquidity problems associated with physical gold.
Features of Gold ETFs
- Purity & Price: Represented by 99.5% pure physical gold bars. Prices are listed on stock exchanges and can be bought or sold anytime through a stockbroker. Unlike gold jewelry, Gold ETFs can be bought and sold at the same price across India.
- Investment Method: Can be bought on BSE/NSE through a broker using a demat account and trading account. A brokerage fee and minor fund management charges are applicable when buying or selling Gold ETFs.
Bonds and Debentures
Bonds and debentures are debt instruments that offer periodic interest payments and return the principal at maturity. They vary in terms of issuer, tenure, interest rates, and risk profiles.
RBI Floating Rate Savings Bonds
- Interest Rate: The current RBI floating rate bond interest rate for 2024 is 8.05% per annum.
- Tenure: These bonds have a maturity period of 7 years.
- Premature Redemption: Facility is available to eligible investors after a lock-in period of 4 to 6 years, depending on the investor’s age.
54EC Capital Gain Bonds
- Purpose: These bonds are specifically designed for individuals seeking exemption from long-term capital gains tax under Section 54EC of the Income Tax Act.
- Interest Rate: Offer a 5.25% rate of interest payable annually.
- Lock-in Period: Come with a lock-in period of 5 years.
Corporate Bonds
- Interest Rates: Depending on the company’s credit rating and market conditions, corporate bonds in India can offer interest rates ranging from 9% to 15%.
- Features: These bonds may come with different tenures, interest payment frequencies, and may or may not have a lock-in period. It’s crucial to review the specific terms of each bond before investing.