Top investments to get higher interest rates

Interest rates on Fixed deposit instruments and on other investment avenues are decreasing continuously, and inflation is increasing on regular basis. Where should one park is hard earned money so that he can get a good value for his invested money. As an investor you have to plan a strategy, that where you should preserve your money so that you can make most out of it. I am listing top 3 safe investment avenues where you should park your money, to get optimum returns on your investments.

1. Liquid funds
Liquid funds are an uncertain investor's biggest ally. Whether the investor is uncertain with regards to the interest rate scenario or uncertain about what he wants to do with his money is immaterial; liquid funds are an answer to both these uncertainties. Liquid funds are ideal for investors who have a very short investment time frame, as short as a day. So you can invest your money in a liquid fund till such a time that the uncertainty (with regards to interest rates in this case) is dispelled.

Since liquid funds usually have very similar portfolios (consisting of money market instruments and call money), there is not much product differentiation over there. However, given that liquid fund returns are wafer-thin, it is imperative to select the ones with the lowest expense ratios.

2. Short-term debt funds
Another fund that fits the bill for an uncertain investor's portfolio is the short-term debt fund. While liquid funds do the job of insulating the investor's portfolio from high interest rates well enough, short-term debt funds do it as well and can even give a slightly higher return. The difference between a liquid fund and a short-term debt fund is the investment tenure. Liquid funds are ideal for investors with an investment tenure ranging from 1 day to 30 days. While investors can remain invested in liquid funds for longer than that, the return may begin to look a little unattractive compared to the next product on the maturity parameter i.e. short-term debt funds

Like liquid funds, short-term debt funds are predominantly invested in low-risk debt instruments (both from interest rate as well as credit risk perspectives) like short-term corporate debt, money market instruments, call money. Only difference is that short-term debt funds can invest in slightly longer dated paper. That makes them ideal for investors with investment tenure in the 30 days - 90 days range. So if investors have an investment tenure of more than 30 days, they should typically be investing in short-term debt funds as opposed to liquid funds.

Investors must note that the short-term debt fund category is quite varied; you have short-term debt funds, short-debt floating rate funds, short-term gilt/gsec (government securities) funds. We recommend that investors select short-term debt funds and short-term floating rate funds. Again, keep an eye on the most inexpensive funds.

3. Floating rate funds
This is the only long-term debt fund we would recommend investors to consider in a rising interest rate scenario. This is mainly due to the fact that floating rate funds are better geared to take on rising interest rates. Floating rate funds invest in debt instruments that have their coupon rates linked to a reference/benchmark like the MIBOR (Mumbai Interbank Offered Rate) for instance. The MIBOR is a good barometer of the prevailing interest rate scenario in the country. The coupon rate on the debt paper is revised regularly in line with changes in the MIBOR. So at the end of the day, the floating rate debt instrument (and the floating rate debt fund) captures the interest rate mood fairly well, at least a lot more effectively than the fixed rate debt instrument.

Floating rate funds are ideal for investors with investment tenure of at least 12 months. Again there is little to choose from within floating rate funds since they invest largely in floating rate paper, which is usually rated highly (in terms of credit-worthiness) and carries lower interest rate risk since coupon rate is revised periodically. So the investor has to keep a tab on the expense ratios of these funds while making a selection, because this can make a significant difference to your returns over a 12-month period.

Top Reasons to Recommend PersonalFN

PersonalFN is a division of Quantum information Service P Ltd (QIS), is focused on providing financial Planning and research solution to indivduals. Beside proving Financial Planning services, PersonalFN is doing research in Mutual Funds, from last 10 years and has always been unbiased in prviding recommendations to Mutual Fund investors to invest in Top Mutual Funds in India, and many of the investors who had invested in Mutual Funds through PersonalFN's recommendations have been benifitted from PersonalFN.

Today as we enter to the last month of 2010, I thought that it is a good time to reflect on why I am thankful to PersonalFN.

1. Unbiased recommendations:  PersonalFN have been consisitent with their recommendations to investors, in provding unbiased advice to investors. In Market many of the financial advisors, Mutual Fund Research firms have been influenced by the various Fund Houses,for their own benifits, but PersonalFN has always been stand up for  the cause of Investors.Their recommendation have always been unbiased irrespective to the reputation of Mutual Fund houses.

2. Expertise in Mutual Fund Research:  In a market where star ratings have been a trend by most of the Mutual Fund Research firms, PersonalFN has always been stuck to their own baiscs.Star rating can be a sure shot method, but for the Advisory Firms, it should be a detailed analysis, why fund is rated higher than other ones or vice versa. PersonalFn brings that Expertises in Mutual Fund research where they give a solid reason for their recommendations.

3. Educating Investors: PersonalFN has taken different initiatives in educating investors on the subjests of Personal Finance, Mutual Funds, Financial planning etc. Money simplified was one such initiative by PersonaFN, which has its own kind of following in investors. The quality of content on their website and sound research theory behind every article on their website is another intiative. Many investors have been benifited by their recommendations earlier, and the same process countinues.

4.Quality of Service: The quality of Services to their clients through either direct commnications or through online media, is another milestine. Most important the quality of recommended Mutual Fund schemes, is another highlight of PersonalFN.

5. Experiecne: PersonalFN is the firm Financial advisory Firm in India, which have taken the intiative of educating investors on their Investments. They are standing in the market for last 10 years.

So if you are looking for some advice on your Investments, then probably PersnalFN is your destiny.

Another Scam: LIC housing loan

Scams and corruption is nothing new in India, but 2010, will be remembered for scmas, which are coming after each day. It all started with CWG, Mr. Kalmadi was on the receving end. Adarsh society, and most famous 2G scams, which is probably the biggest scam in Indian politics till date. The new one which has broken the trust of many investors of LIC, comes from such financial institution which have earned a huge reputations among the investor.LIC, is probably the most trusted brand for insurance, and when name of CEO of such a brand comes under such scam, the reputation which LIC has build over many years, suffers a lot.
These are the issues which comses to lime light, because of some internal issues between Govt, or may be because of alert Media or some may be because of intellegence of CBI.

But these scams are hurting the reputation of India, weare amonget the fastest growing ecconomies inthe world in current date, but such things brings shame to us.

There are still many other small or bigger scams which have still not comes in lime lght, but I am sure they are going to come up over the period of time, sooner or later.

Hall of Shame:

Those arrested by the CBI include Ramachandran Nair, LIC Housing Finance CEO;  Naresh K Chopra, Secretary (Investment) of LIC (Mumbai); R N Tayal, General Manager of Bank of India (Mumbai); Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India (Delhi); Venkoba Gujjal, Deputy General Manager of Punjab National Bank (Delhi) and Rajesh Sharma, CMD of Mumbai-based NBFC Money Matters, with his staff members Suresh Gattani and Sanjay Sharma

Investing in Fixed Deposits

Fixed Deposits, in India is probably the most common investment avenue for Investors. Markets are moving up, and in a scenario where Stock, Mutual Fund, IPO’s Investments can give you more return most people are still comfortable with their Fixed Deposits, where the return is not going to be more than 8%, most cases. The reason why, Fixed Deposits (FDs) are most common investments, is because they are conventional for domestic investors, especially for the investors in rural areas. More important thing about Fixed Deposits is they are risk free investments. But there are also some fundamental concerns in FDs also which an investor should look into while investing in Fixed Deposits.

1.Credit profile of a Fixed Deposit:

Credit profile of a Fixed Deposit investments, is an indicator of the degree of risk associated with Fixed Deposit in terms of repayment of the principal amount and interest payments. For example, an 'AAA/FAAA' rating is indicative of the highest level of safety. Typically, an FD with a higher rating would offer lower returns vis-a-vis an FD with a lower rating. The additional return in a lower rated FD is in effect a compensation for the higher risk borne. Investors would do well to decide on the quantum of risk they are willing to bear and then select an FD.

2. Rate of return

ROI is simply interest rate, on your Fixed Deposit investments. Generally most of the FD’s they don’t offer an interest rate of more than 8%, and even this interest rate will vary from bank to bank, on similar kind of Fixed Deposits. Investors will have to opt for different FD’s depending upon their interest and the one which gives them better returns on their investments, at a rating that suits them.

3. Interest payout options

Investors can generally choose between various interest payout options like monthly, quarterly, annually or on maturity. Ideally, the investor's need for liquidity should be used to determine which interest payout option is chosen. Selecting the interest payout 'on maturity' option can help investors benefit from the compounding effect and clock a higher return.

4. Tenure

The FD's tenure is the period over which the investor stays invested. By and large, a longer tenure translates into a higher rate of return. Investors must match their investment tenure with their needs/objectives. For example, if the investor has an expense to meet 3 years hence, he can invest an appropriate amount in a 3-Yr FD to ensure that the maturity proceeds match his future obligation. On the same lines, if there is a 5-Yr investment tenure, then investments can be considered in tax-saving FDs; this will help the investor simultaneously benefit from tax sops under Section 80C.

5. Premature withdrawal

An often-ignored aspect of FD investing is the premature withdrawal clause. Investors opting for a premature withdrawal can be penalised by either being given a lower rate of return or zero interest depending on the terms and conditions of the FD. Investors would do well to acquaint themselves with the implications of a premature withdrawal before making an investment.

About Money Chats

Money Chats,is a platform which has been created around keeping in Mind, your most important Personal Finance Concerns, like your Money investments, Tax Planning and Savings, New Investment Options, How to plan your Money investments, to get most out of your Investments.

Money Chat will keep you updated on new Investments schemes, expert opinions on investing your valued money in different Schemes, Keeping an eye on Market trends.

Earnning Money is not a big deal, but the real big deal is How you can get most out of Your Money, through your Investments, and on who gets most out his valued money is a real smart Investor.

Money Chats is going to be a platform, which will help you in becoming a real smart Investors.

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