Where should I invest my money as the interest rate is going down?


Wondering what to do when the interest rates of banks fall? Banks are the backbone of our economy. Banks are trying their best to recover bad loans and hence try to sell their bad assets or non-performing assets. During the past few quarters, banks are reducing their interest rate. In this article, we have discussed how interest rate affect us and what is the alternative solution for investment.

Over the past few months, we have observed Banks interest rate is going down. In today's scenario many senior citizens, as well as working professionals, are investing their surplus money into bank fixed deposits. Senior citizens who are retired and who don't have any pension still depend on the bank interest. If the bank's interest rate falls, they have to compromise with their monthly budget as they don't have extra source of income money. When the interest rate falls, the cheaper lending rate helps home buyers as well as auto loans. So in today's article, we will discuss how we can manage our finances if the interest rate falls.

What to do if you have a plan for buying home or car in a bank loan?

When the interest rate falls it is a good time to take a home loan if you have the plan to buy a home. Lower EMI will favor your real estate investments. Now you have to plan about the payback period and adjust with it the monthly EMI accordingly. Lower interest rates also help you to buy your car with a bank loan.

What I will do if I have to invest my surplus money?

Lower interest rate yields lower returns on FD, but if you have no other options and there is no risk-taking ability, then you have to stay invested in FDs. If you are a working professional, have surplus money and the risk-taking ability you may consider investing in a mutual fund. Mutual fund investment for a long term may be fruitful for you. Lots of mutual funds offer a retirement plan also. Stock market investment is risky for senior citizens, but if you are young and earn a reasonable monthly income, then you can start investing your money in the stock market with the SIP route.

Should I invest in land with a bank loan?

If you are working and have the potential to work 20 more years, then you can think about buying land. Hypothetically we can assume that land prices will never go down. If we assume that prices of land will increase with a minimum rate of 10% and your loan amount is 8%, then it will be a good decision to invest in land.

Should I invest my money in company fixed deposits?

The company fixed deposits are offering higher interest rates than any bank. Company fixed deposits are considered a little risky than bank fixed deposits but less risky than stock market investment. Before investing your hard-earned money in company fixed deposits, though, check the company's FD rating. Invest only in a good company's fixed deposits. If the credit rating is bad, then do not invest because it is offering high-interest rates.

Should I invest my money in bond or debenture?

Before buying any bond or debenture of any company, then see its credit rating.If it is of good quality then only invest. You can freely check on the internet about different companyies' credit ratings. While you approach any fund houses or banks to buy a bond, the financial planner will help you to choose according to your requirements.

Should I invest in a Gold bond or gold jewelry?

Buying gold for jewelry is a different perception, but from an investment perspective, it is not wise to invest in gold. Gold is an asset class which can be used to hedge inflation but not for regular income and if you want to choose to invest between gold jewelry and gold bond, then buying a gold bond will be a wiser decision than buying gold jewelry.


Comments

Author: DR.N.V. Srinivasa Rao25 Oct 2019 Member Level: Platinum   Points : 5

A well-written article on various options available for saving our money. Which option is better always depends on the investor's profile. His age, investing capacity and the needs play an important role in deciding the same.

A private company employee who retires will not have a backup of pension. The EPF pension he gets will be very minimal and may not be sufficient to lead his life. So whatever savings he has should be wisely invested because whatever returns he gets monthly has to take care of his requirements. For such people, the best option is to keep in the banks as FD and get monthly interest. Even though the interest rates are coming down, this is the only reliable way to get monthly some fixed income.

A government retired employee will get a good amount as monthly pension and that amount will be sufficient for them to take care of their monthly expenses. Then they can think of getting better returns and can take a little calculated risk and can go for mutual funds of good companies. A lot of studies is required to decide on the fund. It is better to take the suggestion of a known person who has good knowledge of finances.


Author: Sheo Shankar Jha25 Oct 2019 Member Level: Diamond   Points : 7

A person retiring from most of the organisations excluding those of Central and State governments have hardly any back up for pension from their employers. Some of them will be members of EPFO and as such, they are the beneficiaries of some meagre amount by way of pension which can hardly meet their domestic expenses. They prefer a bank fixed deposit to any other saving because of security reasons.

Now with the further reduction of interest rates, their monthly interest rate has gone down substantially calling for seeking for some avenues to mitigate the erosion of their earnings. A few options are there such as investment of some part of the money in a fixed deposit scheme of some reputed companies offering an attractive interest fetching the yields better than the conventional bank's interests. One may also go in for the mutual funds of different portfolios.

Pradhan Mantri Vaya Vandana Yojana by LIC offering an interest of 8.7 per cent would prove to be a better return than the money invested in the fixed-deposit of any bank.

A prudent advice from some reputed financial consultant would lead to better returns of your money.



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