[whitewing]

Originally Posted by thoma

Earlier it was one lakh, right?

I always had this question in mind when it was one lakh. If I split my 3 lakh into 3 FD accounts, will I be protected for each or just for the amount limit of 1 lakh irrespective of number of accounts (same branch)?

AFIK, irrespective of the number of accounts held - in a given bank (across branches), the cap on the insured amount is 5 lakhs.
So, we need to spread accounts across different banks to reduce the risk. I guess it is a tradeoff between convenience and safety

[warrioraks]

Originally Posted by thoma

Earlier it was one lakh, right?

I always had this question in mind when it was one lakh. If I split my 3 lakh into 3 FD accounts, will I be protected for each or just for the amount limit of 1 lakh irrespective of number of accounts (same branch)?

The insured amount is calculated as cumulative of all deposit accounts (savings, current, fd, rd) in a bank. So splitting money into multiple FDs or for that matter, multiple branches in the same bank won’t help.

There seems to be a lot of panic due to Yes Bank fiasco. For anyone who does not have money in this bank right now, I think there is no need to worry. It’s not like the bank withdrawal restrictions came out of the blue. The writing on the wall has been there for some time.

Any financial instrument in this world can default/crash and the best way to avoid being on the wrong side of such a fiasco is diversification and active monitoring of your assets.

[carboy]

Originally Posted by thoma

Earlier it was one lakh, right?

Yes. But now it's 5 lakhs.

Originally Posted by thoma

I always had this question in mind when it was one lakh. If I split my 3 lakh into 3 FD accounts, will I be protected for each or just for the amount limit of 1 lakh irrespective of number of accounts (same branch)?

It's 5 lakhs so you don't have to split it. And if it's more than 5 lakhs, then you can split it but across different banks.

Originally Posted by thoma

One another thing is that there are only few (if any) FD that give considerable advantage over SB account for a period of 2 months.

ICICI gives 5.25% for 2 months.

[Ali3n]

Originally Posted by carboy

ICICI gives 5.25% for 2 months.

When i checked on 27th February, Corporation Bank, Bank of India, Punjab & Sind Bank and Syndicate Bank is giving 5.50%. Private banks might be giving higher. Havent checked them.

[sushantr5]

Originally Posted by carboy

Upto 5 lakhs is insured per account at each branch. So the safest option is FDs.

5 lakh assurance is too less. Looking at news of banks going down, increased NPA for all banks I am not too confident about Fixed Deposits.

@SmartCat I wanted to check whether liquid funds is the way to go.

[SmartCat]

Originally Posted by sushantr5

5 lakh assurance is too less. Looking at news of banks going down, increased NPA for all banks I am not too confident about Fixed Deposits. @SmartCat I wanted to check whether liquid funds is the way to go.

Actually, liquid funds are riskier than banks since they invest with corporates. And corporates default more often. But then, a well-managed liquid fund will be diversified across many securities. So that's a big plus over bank FDs.

If you are nervous about bank collapses, do this. Open a bank account each at -

- SBI (PSU Bank)
- HDFC Bank (safest & largest private sector bank)
- HSBC India or Citibank India (one of the largest banks in the world)

Put some money in bank FDs at these banks, and invest the rest in overnight funds. Overnight fund is like "one day bank FD" - hence the name "overnight" fund (I'm obviously oversimplifying). List of overnight funds is available here:
https://www.valueresearchonline.com/...s&tab=snapshot

Historically, they have offered around 7% per annum, compared to 7.8% per annum for liquid funds. Last year, overnight funds offered around 5.3% per annum.

[sunilch]

Originally Posted by sushantr5

I want to park considerable amount for two months. I am feeling little uncomfortable with savings account or normal fixed deposit. I am afraid of account scams.

I would like to know, is the liquid fund option to feel secure?

If you are having doubts about savings/FD accounts with banks then how are you currently holding your funds?

I am assuming those are in bank accounts only and you are only exploring other options. If you are holding in cash, it becomes a very different matter then.

But if you wish to preserve your capital primarily and don't give much heed to returns for these two months then you have these options:

1) Buy some of the very high rated debt funds from a large/reputed fund house, as many have already suggested.
2) Put into an FD with a mix of very large PSBs which are too big to fail - SBI, PNB, BoB, BoI. India Post will also serve the same purpose here.
3) Buy USD - Cash or TCs. Exchange at a later date when you need money back in INR. No returns guaranteed here but capital preservation is very high.
4) Buy Gold (physical) - You may loose a bit if markets zoom, economy turns around or some very large central bank takes a dramatic action that will reverse the price trend of Gold. But otherwise your capital will remain protected.

All these options are useful as they provide very high liquidity at the time of redemption. Otherwise there are some less liquid options around.

[Simhi]

Yes Bank crisis leading to Segregation of Portfolio. Announcement by major AMC

Nippon India MF
https://www.nipponindiamf.com/MediaR...1-Yes-Bank.pdf
https://www.nipponindiamf.com/MediaR...2-Yes-Bank.pdf

Franklin Templeton MF
https://www.franklintempletonindia.c...docid=k77eue4k

UTI MF
https://docs.utimf.com/v1/AUTH_5b9dd...306-172604.pdf
https://docs.utimf.com/v1/AUTH_5b9dd...306-162029.pdf
https://docs.utimf.com/v1/AUTH_5b9dd...218-085141.pdf

[m8002?]

Folks.
Now that I will be getting a small bonus, thinking if it makes sense to invest in funds as the market is down or partially pay off some housing loan.
I have regular SIPs in large cap funds which I dont intend to change. Just wondering if any investment today will yield more than my 8.5% housing loan.

[thoma]

All my returns are eroding from the past few days. Next will be the principal amount. Should we really be concerned? Withdraw or hold? Will the market recover?

[saket77]

Originally Posted by thoma

Withdraw or hold? Will the market recover?

Worst mistake to make in equity markets is to 'withdraw' in such conditions. In fact, try to make it work for you.

[poloman]

I have always maintained on this thread that, just like stocks you can make money in mutual funds only if you enter and exit at the right time. If you look at the performance of these funds over last 10,5 and 3 years most are having very ordinary returns, even lagging FD returns in most cases.
MF industry is given huge tax benefits, have cut throat expense ratios, still this is what they could come up with.
The once safe debt fund MFs are in even more trouble. The apathy of these funds is to be seen to believe. Any paper go bad, just put them to segregated fund and book the losses for them. What about the hapless investor? Where is the accountability? Where is the plan or road map to recover money? What are they going to do with segregated fund with zero NAV? This is getting more than ridiculous.

[SmartCat]

Originally Posted by thoma

All my returns are eroding from the past few days. Next will be the principal amount. Should we really be concerned? Withdraw or hold? Will the market recover?

Depends on how much you have invested in equity funds and where it stands compared to your interest bearing investments like (Fixed Deposits + provident fund + debt mutual funds).

If you have Rs. 30 Lakhs in equity MFs (market value) and just Rs. 10 Lakhs in interest bearing investments, then go ahead and exit some equity mutual funds. But if your have more or less equal investments in the two asset classes, then you have nothing to fear. Be invested.

Essentially, whether you buy or sell should depend on your asset allocation - not on how much profits you are making on equity mutual funds.

[hondaford]

Originally Posted by poloman

I have always maintained on this thread that, just like stocks you can make money in mutual funds only if you enter and exit at the right time.

Nobody really knows when is the right time!

Why? Because markets are so interconnected today. E.g. A fall in oil price can bring shivers to equity markets. Supply chains extend all the way to China or elsewhere.

There is absolutely no point in timing the market.
Quoting a study by JP Morgan:

JPMorgan Asset Management illustrated how much an investor's returns collapsed*when they missed a few of the best days in the market. They found that if an investor stayed fully invested in the S&P 500 from 1993 to 2013, they would've had a 9.2% annualized return.

However, if trading resulted in missing just the ten best days during that same period, then those annualized returns would collapse to 5.4%.

Honestly, what is there to panic? When we started the investment, it was for the long term. If my retirement is 15 years away, I can afford to wait.

Save 20% of your income regularly. If you have this discipline, by the time you retire you will have close to 60% of your salaried income during retirement.

Life is not so complicated

[poloman]

Originally Posted by hondaford

Honestly, what is there to panic? When we started the investment, it was for the long term. If my retirement is 15 years away, I can afford to wait.

Save 20% of your income regularly. If you have this discipline, by the time you retire you will have close to 60% of your salaried income during retirement.

Life is not so complicated

The definition of long term is getting blurred. If 10 year returns also is matching the FD returns one has to seriously ponder what is going wrong. If you are in a recession stage when you need the money the returns will be seriously eroded. This tag line Mutual funds are for Long term investment is a clever one coined by the industry for their own survival.

It is a blood bath out there. It may be a blip or full fledged recession. But gains made in years are getting wiped out in days and hours.

Sorry for being pessimistic. Really affected by plight of friends who are sitting at capital losses of over 60%.