Among the wide range of investment options available for investors today, Company Fixed Deposits are gaining popularity because of the high returns and other benefits. They are considered far more lucrative than Bank Deposits. However, the slate here is not clean, and Company FDs do have their set of risks involved, which need to be analyzed with utmost caution before investment.

LACK OF SECURITY

Bank FDs are more traditional and thus are a safer option. They provide security upto one lakh investment value, while on the other hand there is a major risk involved if the company you invested in suddenly goes bankrupt!

DIFFERENTIAL REGULATIONS

In case of bank deposits, they are governed by the Banking Regulation Act, 1949, while company deposits fall under the Companies Act, 1956, according to which, equity holders are given preference before FD holders, in case the company is shutting down.

PRE-MATURE CLOSURE OF DEPOSITS

Premature closure before 6 months is denied in most corporate FDs, and the investors have a penalty scare over their head. This premature closure in company FDs also requires a trail of tiresome paperwork, which proves to be another big hassle.

REPUTATION 

Not only should the interest rates be looked at and be lured by, investors should also track the records of the company they are investing in.

No matter how lucrative company FDs may seem, they are a risk in the investment business, and should be approached with proper aid and advice as well as knowledge backed planning.

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We have all heard of the adage – “Do not put all your eggs in one basket.” The same holds true in the world of investing. In traditional investment theory, this means holding a range of different products in your retirement portfolio. Too many investors lose their risk appetite as they age. But some opting for growth products is essential for retirees as well.

Beat inflation

Many investors rely on bank deposits for retirement income. They compare tax saving Fixed Deposits, and then try to choose the best annuity plans. Some think of term insurance premium calculators for retirement. But you should also take into account the impact of inflation on your expenses. The product will fall short if the income does not keep pace with inflation. And to earn inflation-adjusted returns, you should be willing to take some risk, by allocating some portion of the investments in inflation beating products. Considering the increase in life span, the retired life can be around 30 years, if a person retires at 60. 

Mix and Match

The advisable approach should be to protect your needs for the first 4 to 5 years of retirement in safe investments, so that short-term market fluctuations do not impact you. Beyond that, you should have some part of the funds invested in growth or equity assets. 

Some products bring assured income for life, but given the low returns, they should be used only to the extent required to meet necessary expenses such as health and insurance.

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A major reason of low tax compliance in India is the burden related maintaining books of account. Although in recent years steps have been taken to improve that. Moreover assesses now have facilities, and not just relating to tax. You can now avail calculators, such as online income tax calculator and online pension plan calculators among others.

But if you are a professional or run a small business, it is the Financial Act 2016 that must have brought cheers to you. It has certain amendments, one of them relating to presumptive taxation. The Finance Act has made things simpler for doctors, lawyers, chartered accountants, etc. by reducing the amount of effort needed to estimate the income for the year and also to file the returns.

Under the Presumptive Taxation Scheme (PTS), eligible businesses can file the return and pay tax on the basis of ‘presumed’ income. They can estimate their income at the rate of 8% of the total turnover. From the current financial year, professionals have been included under the umbrella.

Eligible professionals
The act includes those who are governed or regulated by an institute or body such as doctors, lawyers, architects, interior designers. Also, such professionals should have gross receipts under Rs. 50 lakh.

No advance tax payment
All professionals and businesses usually have to adhere to advance tax payment rules. However, under PTS, a professional is exempt from paying advance tax. This means that he or she does not have to estimate the income four times a year and pay advance tax accordingly. Instead, the professional has to go through the exercise just once.

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Investing in the equity market is not easy. Putting your money directly in shares may seem rewarding, but it has its risks. It takes intense research and analysis to study individual companies and figure out their value. That is why the common retail investor opts to go for Top Mutual Funds. Let us list down the reasons why it is tough to invest directly in shares.

Knowing in and out of the company – It takes hours and hours of studying the industry of which the company is a part. You have to study market reports, press releases and annual reports carefully.
Understanding Macroeconomics – Apart from studying individual stocks, you have to be aware of the existing economic conditions as well. It includes the country’s monetary policies, currency rates among other factors. It takes a lot of work and study to understand the numbers.

Understanding debt value – A company’s debt position is also a leading indicator of how the stock is going to perform. It is important to understand the relationship between the two. Most amateur investors are simply not aware of these.

It is not a one-time thing- You have to monitor your investments carefully and re-allocate the funds in case circumstances change. To manage all of this with regular day jobs is a daunting task.

If you still want a slice of the growth in equity, you can for equity MFs. You will get trained and experienced managers who pick your stocks. Not only that, your investments will be spread over tens and thousands of stocks. You can even get help to compare Mutual Funds in India from professional advisors.

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Congratulations! You have heeded a very important financial advice, and created for yourself an emergency fund. Having a buffer of three to six months of expenses in liquid assets is a significant measure. It is in fact an integral part of financial planning.

But what comes next?

You need to have a plan for the amount that you were putting away for the fund till now. Appraisal or bonus money should be allocated wisely. Without proper planning, it is easy to turn into a lifestyle creep. Now that you have created a nest egg, here is what to plan for next –

Create Wealth

The best way to create wealth, especially for salaried individuals is to start investing. Instead of depositing all your savings in banks, work towards investing some of that amount. To start investing, you can opt for a Systematic Investment Plan (SIP). You can always get a financial assessment done to decide the best plans for yourself. Take the help of a financial advisor, and don’t be afraid to ask questions!

Plan for retirement 

If you haven’t made retirement planning a priority yet, do it now. It is never too early to start saving for retirement. You can opt from products such as National Pension Scheme (NPS), Employee Provident Fund (EPS) among others.

Improve credit score

A good credit score makes it easier to avail loans from financial institutions. Make sure to pay off any consumer debt, such as credit card loans if you receive a windfall. It is important to never miss out on an EMI (Equated Monthly Installment)

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