[Discussion] Mahindra Finance Fixed Deposit

[dvader]

My uncle just asked me about Mahindra Finance FDs (I wouldn't touch an NBFC with a 10-foot pole). My question is why the hell are NBFCs allowed to call their investment product "Fixed Deposit". This is completely deceptive and will be missold like hell to less Finance/tech-savvy people. I suppose it's not insured with DICGC which makes it like a lock in mutual fund, cuz I wouldn't trust a single thing these NBFCs say.

Is there any law against calling these investments Fixed Deposit? or is it the lack of a law that these NBFCs are exploiting to loot common people?

 

[sxchzy]

My 77yr old father-in-law, whom I consider to be quite sensible in financial matters, is stuck with 1Cr worth SIFL and SEFL NCDs. When I asked him why he invested in these in the first place, all he had to say was "someone recommended it".

exactly what i told
mis selling is very common

In my opinion, the tiny incremental benefit in these kind of instruments is just not worth the risk involved.

not exactly
as long as you know what you are getting into and what can possibly go wrong with it
if you are ready to take a calculated risk with more potenial returns while having extrerme risk of capital loss
that wont be a problem as long as it fits your risk appetite

 

[CARDBITRAGE]

My 77yr old father-in-law, whom I consider to be quite sensible in financial matters, is stuck with 1Cr worth SIFL and SEFL NCDs. When I asked him why he invested in these in the first place, all he had to say was "someone recommended it".

In my opinion, the tiny incremental benefit in these kind of instruments is just not worth the risk involved.

He either has a HUGE corpus or was heavily misguided. By stuck you mean illiquid or the issuers of the bonds have defaulted?

 

[iamdhamo]

Almost all the Bonds, NCDs, FDs are TAXABLE - meaning - the interest paid is taxable. So, if you are 30% tax bracket, those yields/income on 10% bonds are taxable at 30% in the hands of the investor - effective yield is - thus - 7%.

Howver, if you invest in TAX FREE BONDS of GoI, PSUs (like NHAI, NTPC, REC, ONGC, NABARD....) - the yield on these bonds are NOT TAXED - EXEMPTED FROM TAX - so even 8% Tax Free Bonds are far better than 10% taxable bonds - for an investor in 30% bracket.

We invested fair amount of money in such TF Bonds, besides investing in shares.

Is there any tax free bonds that gives 8% sir? I am aware of 5% only

 

[Deleted member 9785]

RBI floating bonds giving 8.05%

 

[RAMESH BABU N]

RBI floating bonds giving 8.05%

They are Taxable.-I think.

 

[RAMESH BABU N]

Is there any tax free bonds that gives 8% sir? I am aware of 5% only

Tax Free Bonds give the best returns ONLY if you got the initial allotment when they were issued. Or, in the first one year of issue and listing. Volatility in the market will give wild fluctuations in the prices of these traded bonds.

So, be constantly on the lookout for the following :

1. New TFB issues
2. Recently listed ones
3. Market crashes or such market related events.

Also remember that you need to consider 2 more important aspects.

Your income tax slab and
The real yield on the TFBs if you buy from the market at market rates.

 

[quino]

They are Taxable.-I think.

yes, they are. they even ask for tds declaration

 

[pride1760]

He either has a HUGE corpus or was heavily misguided. By stuck you mean illiquid or the issuers of the bonds have defaulted?

It's nearly 10% of his liquid assets.
The issuer has defaulted and is currently under insolvency resolution process.

There was no reason for him to invest in these NCDs. The interest at that time was barely 1% above bank FD rates.