A large section in India invests in firing deposits (FD). If someone invests in FD of post office, then someone invests money in a bank or NBFC FD. FD gets annual return ranging from 6 percent to 9 percent.
But is this return sufficient for your wealth creation? Regarding this, a CA has said that FD is like a ‘silent weight trap’.
On social media posts, Chartered Accountant Nitin Kaushik has warned Indian savings about ‘Silent Wealth Trap’. He said that people deposit more money in the term (FD) without considering the opportunities of inflation and development of inflation. Today the FD rates are around 6.3-7% per year, while inflation is around 2.1%. In such a situation, your real return is 4.2 to 4.9 percent.
10 lakhs will give only this much benefit in a year
The CA told how the real purchasing power of ₹ 10 lakh kept in FD increases to only ₹ 10.42 lakh after one year. Despite this limited profit, around 70 Indian families still consider FD as their first savings choices. Kaushik credits this for the lack of ‘guarantee safety’, lack of financial education and market volatility.
He warned that the financial safety in FD is correct as long as inflation is low. If you suppose inflation becomes more than your FD return, then the value of your invested amount will be reduced with time.
If you do not do FD, then what option?
Kaushik suggested a balanced investment. He said that there is a need to diversify his investment portfolio. FD money should invest in equity (estimated 12-15% CAGR), date funds (6.5-8%), and prevention measures from inflation such as gold or other metals. He has advised that one should not remain stable in the same asset class. This can reduce your wealth along with the risk.
Experts reiterate their concern that leaving the money useless or limited to any one safe option can reduce the capacity of compound interest over time and reduce purchasing power. He says that strategic diversification to create real assets, timely requires the willing power to check the portfolio and to adapt to the changing market conditions.