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Old 01-12-2015, 02:13 AM
 
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In India we call them fixed deposits wherein you give a certain amount to the bank for a certain period and you get a monthly interest till that time period is up.
So if I deposit 200k(USD) for 10 years ill get 1200 dollars EACH month till those 10 years are up(or if I decide to take it out in between).

To me it seems like a sweet deal. It is government guaranteed and safe. There's no risk like those involved in stocks and funds. And yet....anyone I ask says it's not worth it.

Sure, taking inflation into account 1200 will be nothing in 2025 but I think it's just side income. If a person hardly has any expenses(no desire for a big car/mansion), no kids and whose most expensive expenses are Blurays and books, what's the harm?

Sure real estate investment is far more lucrative but I think it also involves hassles and paperwork. My father keeps stocks and bonds but he has to keep lawyers and accountants and spends enough time worrying over them.

I am a writer and a budding director. I can get a job to pay my bills(I had two an I quit both) and I will be inheriting 250k in a few years.

Guide me with your expertise. Is CD not seen as desirable in Europe/N America as it is here?
What are the shortcomings.
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Old 01-12-2015, 02:42 AM
 
28,383 posts, read 67,903,744 times
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Default Are there guarantees? Tax advantages?

If you can get the 6% interest from Indian banks that suggests that inflation is a much different problem than in this country where you very likely would only get 1.5%

6% is actually very close to the long term historical return on US stocks and is actually quite attractive.

It would be less attractive if there is no guarantee and/or it is taxed at a high rate.
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Old 01-12-2015, 02:49 AM
 
440 posts, read 668,443 times
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Quote:
Originally Posted by chet everett View Post
If you can get the 6% interest from Indian banks that suggests that inflation is a much different problem than in this country where you very likely would only get 1.5%

6% is actually very close to the long term historical return on US stocks and is actually quite attractive.

It would be less attractive if there is no guarantee and/or it is taxed at a high rate.
1.5 %!!!! It's that bad? Wow. That's nothing. Is it similar in Canada? Canada should be better.
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Old 01-12-2015, 03:03 AM
 
28,383 posts, read 67,903,744 times
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Default Not really...

Quote:
Originally Posted by rishi85 View Post
1.5 %!!!! It's that bad? Wow. That's nothing. Is it similar in Canada? Canada should be better.
One of Canada's most ubiquitous retailers also runs a network of banks -- competive rates: https://www.myctfs.com/Rates/
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Old 01-12-2015, 03:59 AM
 
440 posts, read 668,443 times
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Quote:
Originally Posted by chet everett View Post
One of Canada's most ubiquitous retailers also runs a network of banks -- competive rates: https://www.myctfs.com/Rates/
Wow that's terrible. Even if I invest for 5 years(say 100k) I'd be getting.....200 dollars a month! That's peanuts. What does one get for 200 bucks even today let alone 5 years down the line.
No wonder no one hears or cares about TDs in the first world nations.

I just checked and the premier bank in India gives a 8.5% interest.
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Old 01-12-2015, 07:10 AM
 
Location: The Triad (NC)
26,837 posts, read 57,830,396 times
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Quote:
Originally Posted by rishi85 View Post
Wow that's terrible.
Even if I invest for 5 years (say 100k) I'd be getting...
..200 dollars a month! That's peanuts.
Welcome to our world.

This is why the NYSE now approaches 18,000.
It's the only game in town.

And why no one wants to ask about the man behind the Green Curtain

https://www.youtube.com/watch?v=YWyCCJ6B2WE
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Old 01-12-2015, 12:31 PM
 
12,404 posts, read 9,195,957 times
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Quote:
Originally Posted by rishi85 View Post
In India we call them fixed deposits wherein you give a certain amount to the bank for a certain period and you get a monthly interest till that time period is up.
So if I deposit 200k(USD) for 10 years ill get 1200 dollars EACH month till those 10 years are up(or if I decide to take it out in between).

To me it seems like a sweet deal. It is government guaranteed and safe. There's no risk like those involved in stocks and funds. And yet....anyone I ask says it's not worth it.

Sure, taking inflation into account 1200 will be nothing in 2025 but I think it's just side income. If a person hardly has any expenses(no desire for a big car/mansion), no kids and whose most expensive expenses are Blurays and books, what's the harm?

Sure real estate investment is far more lucrative but I think it also involves hassles and paperwork. My father keeps stocks and bonds but he has to keep lawyers and accountants and spends enough time worrying over them.

I am a writer and a budding director. I can get a job to pay my bills(I had two an I quit both) and I will be inheriting 250k in a few years.

Guide me with your expertise. Is CD not seen as desirable in Europe/N America as it is here?
What are the shortcomings.
In the current interest rate environment, the difference between the rate you get on a CD and what you'd get in a liquid account is not that high - so for many, it does not make sense to sacrifice liquidity for this small premium in interest.

For a 10 year period, with rates this low, you are losing a lot of money compared to investing in equities.
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Old 01-12-2015, 01:27 PM
 
11,780 posts, read 8,207,985 times
Reputation: 3425
Quote:
Originally Posted by rishi85 View Post
Wow that's terrible. Even if I invest for 5 years(say 100k) I'd be getting.....200 dollars a month! That's peanuts. What does one get for 200 bucks even today let alone 5 years down the line.
No wonder no one hears or cares about TDs in the first world nations.

I just checked and the premier bank in India gives a 8.5% interest.
If this data is accurate India's inflation rate routinely flirts with the low double digits, so you might get 8.5%, but inflation will make your money 9.5% less valuable. In the USA we have barely been able to achieve 2% on more than a few occasions.

Historic inflation India
Inflation, consumer prices (annual %) | Data | Table

United States Inflation Rate | 1914-2015 | Data | Chart | Calendar
Historic inflation United States
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Old 01-12-2015, 04:14 PM
 
3,529 posts, read 2,172,235 times
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Quote:
Originally Posted by ncole1 View Post
In the current interest rate environment, the difference between the rate you get on a CD and what you'd get in a liquid account is not that high - so for many, it does not make sense to sacrifice liquidity for this small premium in interest.

For a 10 year period, with rates this low, you are losing a lot of money compared to investing in equities.
Basically this. The illiquidity premium from a CD compared to a money market account is basically nil. I don't know why that is, but there you go. I don't know what money market accounts pay in India, or if they exist.
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Old 01-12-2015, 06:23 PM
 
349 posts, read 413,529 times
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Quote:
Originally Posted by FrankMiller View Post
Basically this. The illiquidity premium from a CD compared to a money market account is basically nil. I don't know why that is, but there you go. I don't know what money market accounts pay in India, or if they exist.
Probably because banks don't want more cash deposits.
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