Pros and Cons of Investing in Company Fixed Deposits

Fixed deposit is a kind of deposit or savings account where a certain amount of money is deposited for a period of time. An interest is added to the original money depending on the tenure of the deposit. Thus on maturities you will get handsome amount of money which is more than that of the initial money. It is a better investment option with low risk and high gain.

Advantages of bank fixed deposits

Always open your fixed deposit account in banks rather than private companies. Although companies’ offers more rate of interest, banks are trustworthy and more reliable. Banks assure some guarantee and repay you one lakh rupees if there is any fault on their part. But, other companies do not offer such guarantee, so there is a risk of investing in companies fixed deposits.

Be careful before investing

The main factor on which the security of fixed deposit depends on is the economic condition of the company. So before investing you should have a clear idea of the companies’ condition and past records. You should not get attracted by the superficial offers and high rates of that company. You should always choose AA or AAA graded companies for investing. These companies are reliable as they have their own reputation in the market. If the company is not renowned and is going through financial crisis, then try to avoid those.

Compare the rates

Getting more interest on your deposit is always an attractive proposition. But sometimes it is dangerous too. You should always be clear of the fact why the company is giving high interest benefit to its customers than others. May be, this is a technique to lure people to invest blindly in their company.

Getting money from companies is difficult

In times of emergency it is difficult to take money from the company by pre closing of the fixed deposit account. This is because they have many un-necessary terms and penalty charges, whereas banks do not have these problems. Effective return is also lowered by the company in case of pre-maturity closing.

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