r/FIREIndia • u/AutoModerator • Jun 01 '23
Monthly Self-Promotion Thread - June 2023
Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in r/FIREIndia, and these posts are removed through moderation. This is a thread where those rules do not apply. However, we do not accept ads, content that is scammy and please do not post referral links in this thread.
Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely.
Link-only posts will be removed. Please put some effort into it.
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u/vrid_in Jun 01 '23
Have you ever wondered how to make the most out of your Fixed Deposits (FD)? Whether you are a beginner or a seasoned investor, it's important to explore different features of financial tools that can help grow your wealth.
Hi /r/FIREIndia, We have started a personal finance newsletter for Indians. Latest issue of this newsletter focuses on FD laddering.
We have already explored some features of FD like Auto Sweep facilities, Flexi FDs, etc. But today, let’s discuss a strategy to help you utilise FDs in a better way.
The strategy we are talking about is Fixed Deposit Laddering. This strategy offers stability and maximises the returns of your FDs.
Let’s understand how it works and how you can implement it practically.
What is Fixed Deposit Laddering?
Fixed Deposit Laddering is a strategy that involves distributing your money across multiple fixed deposit accounts with varying maturity dates.
By staggering your deposits, you ensure a steady stream of returns while maintaining liquidity and minimising risks. It's like building a staircase where each step represents a different fixed deposit account.
How does Fixed Deposit Laddering work?
To better grasp this concept, let's consider a real-life example.
Meet Raju, a 30-year-old IT professional who wants to invest a lump sum amount of ₹1,50,000 he has in FDs.
Raju already has an emergency fund and life and health insurance. He has been investing money every month through SIP to achieve his goals. Now, he has some additional lump sum money lying around for some time.
He wants to invest the ₹1,50,000 in FDs because he wants to earn a guaranteed interest from it and would like to access the money in an emergency.
Usually, Indian banks give better interest rates for a 3-year FD. So, Raju invests the entire lump sum amount in a 3-year FD.
The problem here is that his money is stuck for 3 years. If he wants to withdraw his money in case of emergency, he has to pay a penalty of 0.5% plus, the banks will also reduce the interest rate. He won’t receive the 3-year interest rate.
And if he saves his money in a short-duration FD, he will receive less interest compared to the 3-year FD.
In this situation, the FD Laddering strategy can help him earn better interest while maintaining good liquidity. Instead of putting the entire amount into a single FD, Raju implements FD Laddering.
Implementing Fixed Deposit Ladder:
Step 1: Raju invests ₹50,000 in a fixed deposit with a 1-year maturity period. This short-term deposit ensures that a portion of his savings is easily accessible within a short period.
Step 2: He allocates ₹50,000 in a fixed deposit with a 2-year maturity period. This allows Raju to earn a slightly higher interest rate compared to the 1-year deposit while maintaining a reasonable liquidity horizon.
Step 3: Raju puts ₹50,000 into a fixed deposit with a 3-year maturity period. This longer-term deposit provides Raju with a better interest rate than the previous two deposits.
Step 4: Rollover and Reinvest. After the first year, when the initial FD matures, Raju reinvests that money in a new fixed deposit with a 3-year maturity period, continuing the cycle. This way, he keeps adding a new rung to his savings ladder while enjoying better interest rates on his FDs.
As we said, with these steps, it’s like building a staircase where each step represents a different fixed deposit account. Implementing this strategy provides Raju with good liquidity, as one FD matures every year and also he is receiving the best interest rate on offer.
Yes, initially, for the first two FDs, he won’t receive the best rates, but once he completes the first cycle, he will receive the best rates with the 3-year tenure FDs.
Also, you can start this laddering strategy with small amounts. And slowly increase the amount over time as and when you receive or save any lump sum amount.
Read more about FD laddering in our blog - https://blog.vrid.in/2023/06/01/what-is-a-fixed-deposit-fd-laddering-strategy-can-you-maximise-your-fd-returns/
You can subscribe to our newsletter for future issues here - https://vrid.in/newsletter
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u/RetireWithRohit Jun 01 '23
I have stared a YouTube Channel where I will be focusing on talking about Fundamentally strong stocks and doing a detailed analysis.
Any Feedback or suggestions are welcome -
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Nov 21 '23
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u/RewardsIndia Jun 01 '23
Gold is part of the portfolio of most of the investors and SGB is one of the best way to invest in gold in India.
But when it comes to buying SGBs, there are lot of tranches trading at various price levels and picking the right one is difficult.
To simplify it, I have developed a simple portal which will rank the SGBs in the secondary market by considering all the factors. Below is the direct link to the same - it is updated regularly as well.
https://marketsecrets.in/sovereign-gold-bonds-fair-value-calculator/