Interest rates around the world at crazy lows, are FDs a bad choice?


Interest Rates in G20 Countries
Russia 8.5
Brazil 8.25
Turkey 8
Mexico 7
India 6
Indonesia 4.5
China 4.35
Australia 1.5
South Korea 1.25
United States 1.25
Canada 1
United Kingdom 0.25
Euro Area 0
France 0
Germany 0
Italy 0
Netherlands 0
Spain 0
Japan -0.1
Switzerland -0.75

A loss for FD’s to be a gain for equities?

@abbanerjee @portfolioplus911 @haribabu… Your thoughts?

FDs are a losing proposition.

Imagine this - you invest Rs.100/- at a 6% for 2 years, you get back Rs.112.36/- at the end of 2nd year. Income from FD is taxable, so assuming you fall under the 30% bracket, we are talking about paying Rs.3.708/- as taxes, which makes the post-tax returns as Rs.108.65/- or an effective growth rate of 4.24%.

Considering an average inflation rate of 6%, you are actually losing money at the rate of 1.76% by investing in FDs.

If you hate someone then ask them to invest in FDs :slight_smile:


If you are looking to earn something from interest. Then you must look at real interest rate ( Interest rate -also called Nominal interest rate Minus Rate of inflation). At the moment the real interest rate is also high in India compared to other asia pacific emerging countries. But we all know the history of inflation in India (& I believe government’s old method and babus @ statistics department understate inflation)

Another risk to this positive real interest rate is recently belligerent oil prices and high taxes on oil prices. Then u know what happens to consumer prices and inflation

U may recollect “dhosa” story from ex RBI governer Rajan here


FDs are always a bad choice. Wealth comes from ownership - either part (equity) or full (real estate, business etc). And this has to compound positively - hence you need stock selection.

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MFs give Tax Free returns better than FDs. even if you invest in Blue Chip Index stocks, especially Auto Stocks it will give min 5% appreciation due to inflation.

Equities are inflation adjusted. even if company performs normally due to inflation prices will go up only.

where as FDs not adjusted to inflation and effective benefit of FDs are 67% of your gain due to Income Tax

That is why we are seeing sharp surge in Customers of Zerodha.

AMCs also doing good marketing these days. we can see number of Investor summits happening in Tire 2 and 3 Cities also.

Another Advantage for Equities is even EPF funds are also now invested in Markets this will only push up the markets in the next decade.

GDP is touching low at present from here it will only go up. that is why markets going up despite poor GDP figures.

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