Tip No. 1
Know the Historical Background of Company

If you desire to deposit large amount in any company as FD, then it is very necessary to know the historical background. These days, many companies are creating fund and sometime after, they are run out from market and it may possible that you money is plunged by worst company. So get knowledge about company.

Tip No. 2
To Invest in Profitable Company

Try to analyze the company’s performance with financial or ratio analysis and then only invest in profitable company. Avoid investing in FD of those companies who are suffering losses.

Tip No. 3
To Invest in Short Term FD

Never capture your money in Long term FD. If you have to deposit your money in company’s FD, then only deposit for 3 to 5 years. If any company is providing Mutual fund or public deposit for 3 or less period, then deposits in these fund is better.

Tip No. 4
Know complete terms and conditions of Company Fixed Deposits

Almost all companies have different terms and conditions. It is very essential to know term and condition of company FD. Never deposit in any company who is giving interest which is less than Bank FD. Some company may accept FD by creating condition that you can not withdraw your money within six months or it may possible that some company will not give you interest if you will withdraw money less than six months.

Tips No. 5
Compare Bank FD and Company FD investment

Never be excited by just seeing high return on the investment in any company’s FD. Compare every point deeply after brainstorm and thinking intensely. Imagine, if company will become insolvent, can it give you guarantee to repay your FD amount or not. If not never see the return but see the security point of your cash.

We also recommend few company fixed deposits, but we also want to inform the investors regarding benefits as well as warn investors regarding the pitfalls.

Company fixed deposits are unsecured. In case of bank fixed deposits, the Deposit Insurance and Credit Guarantee Corporation of India guarantees repayment of Rs 1 lakh in case of default. There is no such guarantee offered in company deposits and the safety of your deposit depends on the financial position of the company. So, as a depositor, you have no lien on any asset of the company, in case it goes into financial difficulties and is wound up. Your turn to get your money back would come only when secured lenders have been paid. So do not invest in unknown companies.

Unless you need income regularly, you should prefer cumulative schemes to regular income options since the interest earned automatically gets reinvested at the same coupon rate, resulting in better yields.

The risk involved while investing in smaller companies is higher. You can check with distributors or with friends about the credentials of the promoters and their past track record. Opt for companies that pay dividends and are profit making. Avoid loss-making companies or those who do not pay dividends. If a company has made a one-off exceptional loss in a particular year, but has a good parentage and past track record, you could consider it.

For NBFCs, RBI has made it mandatory to have an ‘A’ rating to be eligible to accept public deposits. Investors should go only for AAA or AA-rated schemes. Go for shorter tenures such as 1-3 years. This way, you can keep a watch on the company’s rating and servicing, and also have your money back in case of an emergency. Watch out for any adverse news on the company you have invested in and take necessary action if need be.

Compared to mutual funds or bank fixed deposits, company fixed deposits are rather illiquid. In most cases, premature withdrawal is not allowed before completion of three months and after 3 months there is a penalty clause which is pretty high compared to bank deposits.