[Fx14]

Originally Posted by Old_Salt

Interest earned on a NRE Savings/FD is tax free for that financial year as long as the account status is maintained,

......

Should have been more diligent with the banks financials.

One approach that you could have (if comfortable) in view of your specific scenario is to limit your exposure to INR 5 Lakhs, which is the DICGC insurance coverage provided to all depositors.

[drrajasaravanan]

Originally Posted by sreerknair

Hi all, need some suggestions. I am planning to buy a new car with full cash. This means I have to dip my hands on my savings. I have money invested in FD as well as in MFs. I could withdraw the cost of car from either of these savings. FD are all on average 6% interest rate at the moment, where as the MF on average is at 15%. This is the max net average I have seen in 6 plus years. Both instruments are purposed for any long term requirements. Considering this market rally, which will be the wise option? Redeem the MF units and buy the car? Or break few FDs and buy the car? Or take portion of money from MF and other from FD? My car budget is around 15 to 17 L.

Hi,
IMHO, if I am in your shoes I would break neither, instead, I would take loan against my FD which is usually charged 1 to 2% more than the interest paid and the term for closure is left to you. As I recall you are eligible for up to 85% of your FD as a loan amount and you can pay it at your discretion. Cheers

[DigitalOne]

Originally Posted by DigitalOne

I am planning to vote "Yes". I feel a controlled winding in FT USB fund up serves me better. I have no immediate need of the funds and I see no reason to bear losses.

Voted "Yes" today towards a controlled winding up. Another long wait now till 21 Jan for the result of the voting to be announced.

[N.A.GTC]

Originally Posted by drrajasaravanan

Hi,
IMHO, if I am in your shoes I would break neither, instead, I would take loan against my FD which is usually charged 1 to 2% more than the interest paid and the term for closure is left to you. As I recall you are eligible for up to 85% of your FD as a loan amount and you can pay it at your discretion. Cheers

Could you explain as to one should do this? Wouldn't one end up essentially losing money (loan interest payments) this way?

[drrajasaravanan]

Originally Posted by N.A.GTC

Could you explain as to one should do this? Wouldn't one end up essentially losing money (loan interest payments) this way?

Hi
I think I would be taking a loan which I can close at my discretion and faster without any foreclosure clause or a time limit of 2 to 5 years. I should not be losing much in the interest as it will be a short term loan. If I am purchasing a car for 15L, I would do a 5L down payment and 10L as loan against FD which I should be able to close under 6months. Do correct me if I am wrong as I thought of this for my eventual new car purchase next cycle. Cheers.

[pandey.jai]

I have been following this conversation around how one would prefer to fund their car purchase. I've seen a lot of suggestions to not use your saved money and instead opt for a loan.

What I am failing to understand is if one has sufficient amount saved and is planning to withdraw a part of the amount to fund their car purchase, why not opt for full cash payment? If the entire savings are being used, then loan is definitely a better option but if the amount is only a part of their entire portfolio, then why go for a loan in the first place?

Originally Posted by drrajasaravanan

If I am purchasing a car for 15L, I would do a 5L down payment and 10L as loan against FD which I should be able to close under 6months.

If you're indeed planning to close the loan in 6 months time, then why even take that loan? Assuming an FD has 6% ROI and a loan against this FD is (say) 8%, then, does it really make much of a difference in opting for the loan and the hassle of HP removal etc., in addition to losing the differential amount on interest on an already depreciating asset?

[drrajasaravanan]

Originally Posted by pandey.jai

If you're indeed planning to close the loan in 6 months time, then why even take that loan? Assuming an FD has 6% ROI and a loan against this FD is (say) 8%, then, does it really make much of a difference in opting for the loan and the hassle of HP removal etc., in addition to losing the differential amount on interest on an already depreciating asset?

Hi,
I am guessing the car loans would be upwards of 9%, its easier to pay over 6 to 8months than paying 10L upfront if I have not saved it already, I won't disturb my FD or other debt principal and I don't think there is HP as the money is up to me the use in whichever way I say fit.
Or am I approaching this in a wrong way.
Cheers

[callvvijay]

Originally Posted by sreerknair

Hi all, need some suggestions. I am planning to buy a new car with full cash. This means I have to dip my hands on my savings. I have money invested in FD as well as in MFs.
.....
My car budget is around 15 to 17 L.

Many folks have already commented about the Loan on Deposit - and I would also suggest the same.

Just step into the bank where you hold your FD and ask for LoD. This will be 2% higher than the rate at which the FD was availed by you.

This 2% reduces all the way to 0% or 0.5% if the FD is in the name of the employee (or retired employee) of the bank ---> I used this route as my dad is a retired banker.

Major advantages:
1. You repay the loan as and when you want/can. No time restrictions and no pre-pay penalty
2. No hypothecation in your RC book. Avoids an unncessary visit to bank and the dreaded RTO to remove the hypothecation.

Cheers!

[rjainv]

Pls do consider post tax returns when comparing FD rate vs loan rate.

If you are in 30% slab, you would be effectively getting 4% interest in a 6% FD, while paying 8% interest in loan in the period.

[bvasista]

Thanks to this wonderful forum for the amazing inputs !!

I am looking for some short term mutual fund investments (for 2 years). Please advice if ICICI Prudential Ultra Short Term Fund-Growth is a good one to invest as SIP. Any others are also welcome !

[JediKnight]

Originally Posted by SmartCat

1) IDFC First Bank is not in a good shape -> Rs. 2,000 cr loss in FY19 and Rs. 3,000 cr loss in FY20. To attract depositors, they are offering such huge interest rates. It is very likely that they are lending to customers who are sub-prime.

Do you think IDFC mutual fund customers should also be worried? I have sizeable money in two IDFC mutual funds. I understand that MF and Bank are separate businesses but we have seen promoters legally/illegally moving money between group companies.

[SmartCat]

Originally Posted by JediKnight

Do you think IDFC mutual fund customers should also be worried? I have sizeable money in two IDFC mutual funds. I understand that MF and Bank are separate businesses but we have seen promoters legally/illegally moving money between group companies.

I have some good news and bad news.

Good News: IDFC Mutual fund is not owned by IDFC First Bank. It is owned by a company called IDFC Ltd.
Bad News: IDFC Ltd is in a terrible shape too

Anyway -

- IDFC Ltd does not have a proper promoter. It is owned by GoI, FIIs, banks etc. So no worries about siphoning of funds.
- If IDFC Ltd gets into trouble, they will sell IDFC Mutual fund to raise money. That's what Reliance capital did. They sold Reliance Mutual Fund to Nippon India.
- Sure, a corrupt promoter can siphon off funds from a mutual fund company. But he cannot touch the client funds that are there in the mutual fund. It is totally ring-fenced. The fund house is just a manager. A Trust ensures that all rules and regulations are followed.
- All fund houses use "asset management software" from reputed financial firms to manage a mutual fund. There is no provision in this software to pull out client funds. The money in a mutual fund can only go back to the customer's account.

[kshastry]

@smartcat

What is your view on investing for a 5-8 year horizon; are "internaltional funds" investing in non-India worldwide stocks are a better bet OR the Indian Equity funds?

[SmartCat]

Originally Posted by kshastry

What is your view on investing for a 5-8 year horizon; are "internaltional funds" investing in non-India worldwide stocks are a better bet OR the Indian Equity funds?

Not a big fan of international equity funds, primarily because it behaves exactly like an Indian equity fund. When S&P 500 goes up, we go up. If S&P 500 goes down, we go down.

The correlation between the two is very high, and it has been so for almost 2 decades now. Such high correlation means investment offers no diversification benefits - returns & volatility are similar.

[DigitalOne]

Originally Posted by SmartCat

- Sure, a corrupt promoter can siphon off funds from a mutual fund company. But he cannot touch the client funds that are there in the mutual fund. It is totally ring-fenced. The fund house is just a manager. A Trust ensures that all rules and regulations are followed.

Technically true but I have read about couple of instances where there were "deviations". The erstwhile Reliance Mutual Fund used to buy a lot of bonds of ADAG group companies. While technically this is not an issue as these are different companies, it did raise eyebrows. For a long time I had stopped investing in Reliance MF and restarted only after Nippon acquired it.

Source: Moneycontrol

ICICI MF once rescued a faltering Bharat 22 ETF issued by them by investing a substantial amount from one of their existing funds. This was a clear violation of the investment mandate of the fund but they covered it up.
Not able to find the source link for this but I very clearly remember reading it.