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Company Deposits are simply nothing but fixed deposits in companies that earn a fixed rate of return over a period of time. Company deposits are really down-to-earth products. The influential advantage of the company deposits is its plain simplicity. Company deposit is understood even by the most novices among the investors community.
Have you ever wondered the logic behind why pure vanilla flavored ice cream sells more than any other flavor? Similar logic is just as true when it comes to the company deposits vis-a-vis many other modern investment options.
With the meltdown of NBFCs almost a decade ago, company deposit market had a major slow down, but volumes still remain significant and there are loyal investors who prefer company deposits to other investment products.
Risk in Company Deposits:
Company deposits are basically unsecured. That is if the company defaults in repaying the interest or principal, the investor will not be able to recover his capital. As a company deposit holder, you don’t have any lien on any asset of the company, in case it goes into financial difficulties. This makes the company deposits a risky investment option.
Checklist for choosing right company deposits:
There are some good investment options in company deposits. Also there are some bad investment options. If you know how to select the right company deposit then company deposits can be really an interesting investment option in your portfolio.
For Selecting Right Company Deposits,
- You need to ignore all the unrated company deposits and need to choose company deposits with the rating of AA or higher.
- Choose the company deposits of the company with better reputation within a given rating grade. If you read business papers and magazines periodically, it is not difficult for you to check the credentials of the company.
- ?Take the help of the qualified financial advisor in choosing the right company deposit. But mind you, there are very few reputed and qualified financial advisor.
- Company deposits need to be spread over a large number of companies in different industries. By this, you can diversify your risk. Irrespective of the rating and reputation of the company, don’t invest all your investments in a single company deposit scheme.
- You need to check on the servicing level and standard of the company before investing in that company deposits. You need to ignore companies that don’t care or care little about issues like sending interest warrants and principal cheques.
- After investing in a company deposit, you need to constantly track the company’s credit rating. The times are uncertain and downgrades are rampant.
- Check the company’s balance sheet for its asset back up, profitability, reserves, existing borrowings and loans.
Every investment has its distinct features and benefits. Likewise each investor has specific risk taking ability and personal needs. Professional investment planning needs matching of the product benefits and features with the financial objectives of the investors. So one need to weigh the various alternative investment options like bank deposits, debt funds vis-a-vis company deposits before making a choice.
Also you need to evaluate your investment plan is completely in sync with your financial plan or not. To create this master financial plan which help you take all other financial and investment decisions of your life, we are offering
