Should you Invest in Company FDs?

Everything has a good time and a bad time. Nothing stays forever of course. If you have been investing your money somewhere, chances are that initially it did not kick well and caused you lots of loss, however later it gave you a good return. But this is not always true. Sometimes, you gain in the beginning but end up losing a lot of your investment.

Of course, our past is full of stories of those who invested their fortune in companies that went to shackles and the investors suffered huge losses. Company fined deposits are loaded with such history but recently, people are coming back to these investments and now, company FDs are again gaining a reputation. So, what are these FDs? Should you invest in them? Would that be beneficial?

Fixed Deposits are generally made in banks. However, the interest rates have fallen very low and that is why, people have lost interest in bank FDs. A rather pleasing fixed deposit is that in company. It is not for longer durations plus the return is far better and higher than what banks have to offer.

Hence, company FDs are similar to normal FDs only. These are provided by a company to investors at a fixed interest rate. Almost every company offers a higher interest rate than what a bank would give you. This is one good reason why it is a preferred investment choice over others.

So, why would companies offer you higher interest rates? Well, the answer is that these deposits are first and foremost unsecured debt instruments. Understand the banking deposits here first. When you make FDs in bank, you are bound to get a percent of interest over a given time period on whatever investment you make as per the offer you choose.

If the bank is at any default, you would be repaid 1 lakh INR as per Deposit Insurance & Credit Guarantee Corporation of India. However, no company would offer you such guarantee. So, whether or not your investment is secured in that particular company would directly depend on the reputation of company itself, its financial health and that how old and trustworthy that company is.

If you wish to make successful investment, you must keep proper track and record of the promoters of the company as well as the current financial position of the company. If the dips and rises are constant, you may rather want to wait a little to look at where the stats stabilize. It is always better to be aware of every pro and con of investment.

Given that you are absolutely sure about your decision, only then proceed with it. Otherwise, you can always take guidance from others and ask for the right thing to do. Those who have invested in the company themselves would be able to guide you better than anyone else.

Some Reputed Companies offering FDs are:-

Shriram Transport, Mahindra Finance, HDFC, ICICI etc . Amongst these, Shriram offers best interest rates and ICICI lowest. These can be bought online from ICICI Direct account or directly from the company. Mahindra Finance offers additional 0.25 interest to people holding shares in the company.