The conventional way of investing wealth in India has always been to allocate funds to a fixed deposit. A large majority of senior citizens in India still depend on fixed income instruments to serve them with a regular income at retirement. Many seniors living in India turn to FDs as they have no clue about online trading or investing in other investment instruments like shares, mutual funds, etc. They almost always turn to fixed deposits to fulfil these needs.

With tax benefits attached to fixed deposits and higher interest rate payouts, senior citizens seem happy with fixed deposits in India. But, really, do they? Recently, fixed deposits seem to have lost their charm.

Fixed Deposits Lose Their Shine

The share market today offers investors of all ages the opportunity to invest and earn good returns. If you are looking to diversify your financial portfolio or a long-term investment channel, the stock market can be a good place to allocate some of your capital. However, many people still believe in the traditional and safe way to invest, through a fixed-income instrument like a fixed deposit or FD.

However, the once-popular FD has lost its shine as banks have slashed interest rates. Thus, several Indians, not just in the senior citizen category, are looking to invest in other relatively safer investment vehicles. While it is simple to open a demat account and try your chances with shares, you may also want to mitigate your risk with secure investments. Bonds seem like a great solution to many people.

Bonds Lead the Way

The common consensus of analysts today is that bond yields are giving higher returns, relative to fixed deposits, as they are linked to the market. With a high demand of investment in bonds, many bonds are increasing interest rates to attract more investors. Bonds also offer other benefits, and if you do not want to invest in the share market today directly, bonds could be a good option. In some of the advantages of bonds, bond players point out that certain tax-free bonds having a seven-year maturity give a tax-adjusted return of around 8%. Before you think of any other investment, like an upcoming IPO, you may consider bonds which generate higher yields than most FDs give at a mere 6.5%. It is important to note that, in previous times, FDs gave higher returns than bonds, becoming popular with investors of all ages. Explore the FD Calculator and get deeper insights.

Beating Inflation

Numerous investors have turned to online trading as a way to beat inflation. In the current times we live in, investors are trying their hand at various methods to combat rising costs, and attempting to earn some extra income to tide over hard times. Inflation hurts people at every level, and for those who are risk-averse, if fixed income instruments generate a moderately higher return, this could be the cushion people require. To fight inflation, the Reserve Bank of India has increased rates of interest in the present cycle. Consequently, banks have hiked their rates of lending. However, whatever increase has occurred is disproportionate to the FD rate hike.

Bonds - Better Investments Now

Given the high levels of inflation, and how circumstances are in the country, G-secs (government securities) and corporate bonds seem like safer and better choices that offer decently acceptable returns. Nonetheless, to make your portfolio more diversified, you could always open a demat accountto invest a portion of your capital in stocks. Right now, although the upcoming IPO boom has subsided somewhat, you could explore investment here too.

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