Fixed deposit, a term which our seniors have tried their hardest to acquaint you with! But in the era of supercomputing and complicated financial instruments, which make it seem like fantastic riches are almost within grasp, and there is no actual way to lose money, there still exists the good old fixed deposit with its humble rate of interest. So, why should we look at something old fashioned and apparently not as profitable as others? Reliability is one major factor. Fixed deposits do not behave in the same unreliable manner in which other instruments work. They are more or less secure and this makes them a very reliable choice. Another major reason is that of an assured pay-out. In a fixed deposit you know the interest rates and the expected outcome right when you make the investment. This gives you a peace of mind which is very rare in the financial business. So, what exactly is a fixed deposit in the first place? It is a kind of financial instrument in which you can invest your funds for a set tenure which will then provide you with a rate of interest in return. The benefit is that it is as simple as opening a savings account and equally risk free but with a higher rate of interest. Now, there are two types of fixed deposits available to the investor.

1. Traditional / Non-cumulative plans

These are the traditional plans you know about. In this case, the principal gets invested for a specific duration and the frequency of the interest pay-out is one which is determined by you.2. Reinvestment / Cumulative plansAs the title suggests the interest in this plan is added to the principal and compounded; the sum total of which is handed out during maturity.Now what are the things you should keep in mind before making a fixed deposit?

• Try Opting for company FDs

Fixed deposits offered by companies have a higher rate of return and usually have more flexible tenures compared to that offered by banks.  

• Choose your tenure carefully

To avoid the monetary penalty most fixed deposits levy on you if a premature withdrawal is made,  make sure that you choose your tenure very carefully  

• Compare different banks

Remember to compare different banks offering different interest rates and options before you make your choice, as an intelligent investor always looks at all his options before making a decision.  

• Split your money

There is a small but a sometimes useful benefit of splitting your money across different banks and different fixed deposits. If you may need to liquidate one of your deposits for an inconceivable reason, then you also have to make sure that there is a deposit you can liquidate immediately without incurring any significant penalties.   So don’t forget to check out the meek and silent fixed deposit before you decide to go through with an investment. But remember no investment is infallible and the same is with fixed deposits.

Being an Indian, we all love Gold. Every Indian family owns a little bit of it. For Eras, Gold has been considered as one of the propitious gift in India for any occasion, whether it’s during festivals, family celebrations, etc. It is considered one of the best investment options and used as a hedge against inflation. Over decades, India has always been the world’s largest consumer& importers of gold. Why Invest In Gold? One of the most important advantages of investing in Gold is its ability to sustain a portfolio & protects it against market variations. During time of economic crisis, Gold prices have always shown better stability as compared to other investment products. Historically, gold prices have always shown better stability even during time of market crisis, as compared to other types of investment. Gold has cater stable returns during the long run. Gold – taken as a currency, commodity and investment for thousands of years – it is popular amongst today’s investors as it can be used as a hedging tool against devaluation, inflation or deflation of currency, and due to gold’s ability to provide a "safe haven" during times of economic crises. Various Ways to Invest in Gold. Investment in Gold can be done in two ways either in physical form (Gold coins & bars through bank & Jewellery) or in Non-physical form (Gold ETFs, Gold Fund of Funds, etc. through brokers or authorized entity).But which amongst these is the smartest way to invest in gold? Let us find out…….. Gold ETF is the smarter way to invest in gold. Gold ETFs are units representing physical gold, which may be in paper or dematerialized form. These units are traded on the exchange like a single stock of any company. 1 ETF unit = 1gm. of Gold in spot. Here is why Gold ETF is smarter way to invest…

• Price approximately equal to one gram of Gold.
• No premium or making charges.
• Backed by physical Gold holdings of 0.995 purity.
• No wealth Tax.
• Long term capital gains for one year.
• No STT.
• No storage issue and fear of threat.
• Listed and traded on the NSE with a minimum lot size of 1.

Investing in gold via ETFs or through gold funds is a much recommended option instead of buying physical gold. Recently, small investors have started preferring to invest in the yellow metal through Gold ETFs instead of putting in physical form like bars and jewellery. ETFs offer you many advantages over physical gold—transparency is one of them. There is no question on quality as you buy gold in paper form and gold bullion equivalent to the same is held in 99.5% purity.  Gold ETFs can be easily liquidated through the brokers at transparent prices available on the exchanges and you get the same price for them across India.Also, in case of ETF, there are no making charges. In ETFs, liquidity is high as they are traded on stock exchanges or the same can be redeemed by fund houses. Further, they are more tax efficient and they become long-term capital gains if held for at least a year, unlike physical gold that becomes long-term capital gain only after three years. Safety is another feature which makes ETFs a better option since there is no risk of theft.If you buy physical gold, there are three principle associated costs - storage, insurance, and transportation. Insurance is dependent on the volume of gold you own; however, both storage and transportation costs are less dependent on minor changes in volume. I am a small investor. Is it easy to accumulate gold in small quantities through ETF…? With Gold ETF you can even buy one gram of gold at a time since each unit is roughly equal to the price of 1 gm. of gold. I am a HNI. Can I convert my ETFs into physical gold…? AMCs will permit you to redeem your ETFs in the form of physical gold as long as you hold the equivalent of 1kg of gold in ETF form, or in multiples thereof. So if you are a big buyer of physical gold, it makes sense to compare the Gold ETF ( plus brokerage costs ) with the cost of buying physical gold(plus custody,insurance,VAT & wealth tax).You may find that buying ETFs & then either selling them for cash or redeeming them in kind may be more flexible & cost-efficient for you. Tax Aspects In the budget 2015, Mr. Arun Jaitely (Finance Minister) revised the tax structure for all non-equity mutual funds including Gold ETFs and Gold savings funds. According to the new structure,the minimum holding period for these funds to qualify for long-term capital gains (LTCG) tax has been increased from 12 months to 36 months. In addition, LTCG tax rate on these funds have been increased from 10% to 20% with or without indexation. In my opinion, if you want gold for investment purpose ETF GOLD is the best option &if you want gold for your personal use then you can opt for physical gold. I suggest everyone who wishes to invest in Gold should consider investing in Gold ETFs. Gold ETFs can be easily sold at transparent prices through the exchange whereas it is relatively difficult to sell the gold coins and bars. Most banks and jewelers do not buy back the physical gold. Moreover, there is no transparency of prices and they also deduct heavy charges. Furthermore, the expenses incurred in buying, selling and storing physical gold is much higher than the cost involved in buying and selling Gold ETFs. Now choose the appropriate route to sparkle your financial life by investing in the sparkling asset.

This blog is written by Gaurav Arora student of Post-Graduation in Financial Planning, International College of Financial Planning (ICFP)

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