1. A suitable debt-equity asset allocation, meeting overall needs within own risk profile, is more apt than a portfolio based on post-tax returns alone.
2. This may at times require inclusion of various products without holding one against the other as they are incomparable.
3. "Positive returns all the time" from FDs is an age-old myth, as their basic function is not to beat inflation, or to grow wealth, but to provide short-term safety during its tenure by keeping rates very close to it.
4. If inflation rate is equal to its returns, purchasing capacity of products and services remains at the same level, but if returns are lower, then buying power erodes, despite having "saved" over a period of time.
5. If inflationary situation continues to be more than returns over several years, the purchasing power becomes worse off every year, leading to a precarious situation upon reaching the retirement age.
6. In fact, it becomes even worse for a taxpayer, as FDs are fully taxable at the person's slab rates during his earning years.
7. There's also "reinvestment" risk in FDs as reinvested money after maturity won’t earn the same return as original FDs if rates keep falling as they are, and this can also happen during falling inflation too.
8. An investor needs to decide his own Equity:Debt allocation after ascertaining his individual risk profile - as per age, commitments, current income, investments in hand, etc. - and his realistic goals - short-term, medium-term and long-term - before choosing suitable products, hence a generalized 80:20 ratio isn't advisable for all types of investors.
2. This may at times require inclusion of various products without holding one against the other as they are incomparable.
3. "Positive returns all the time" from FDs is an age-old myth, as their basic function is not to beat inflation, or to grow wealth, but to provide short-term safety during its tenure by keeping rates very close to it.
4. If inflation rate is equal to its returns, purchasing capacity of products and services remains at the same level, but if returns are lower, then buying power erodes, despite having "saved" over a period of time.
5. If inflationary situation continues to be more than returns over several years, the purchasing power becomes worse off every year, leading to a precarious situation upon reaching the retirement age.
6. In fact, it becomes even worse for a taxpayer, as FDs are fully taxable at the person's slab rates during his earning years.
7. There's also "reinvestment" risk in FDs as reinvested money after maturity won’t earn the same return as original FDs if rates keep falling as they are, and this can also happen during falling inflation too.
8. An investor needs to decide his own Equity:Debt allocation after ascertaining his individual risk profile - as per age, commitments, current income, investments in hand, etc. - and his realistic goals - short-term, medium-term and long-term - before choosing suitable products, hence a generalized 80:20 ratio isn't advisable for all types of investors.