All commercial activities trade and commerce, manufacturing, services are operated with a goal of making a positive return on the investment being made in the venture. While some investments promise a high return they may come with a high level of risk associated with it, and vice versa, were in the return is low but so is the risk associated with it.
High returns are always the most attractive investment options, and those who make them and also realise the promised return, are fortunate. Its good to know those cases, but its also better to be aware of once personal circumstances and not get lured in to making similar investments and ending up losing all or most of it.
The stock market and the mutual funds promise for higher returns than the bank deposit rates, but they also come with risks of uncertain markets. While the downturns in a market don’t last forever, so do the upswings. Timing of investment also matters as you don’t want to invest at an all time high market. And then comes the complexity of these markets behaviour, as no one can be sure of what might happen down the road.
Savings deposits in banks are the safest instruments to invest, until and unless the whole financial system collapses, which is a rare event, and also if the banking institution has done its job well, then even in a bad economic scenario, it may continue to maintain the good books of its customers. However, in recent times, with the rise in inflation and interest rates by the central banks globally, we are seeing the banks offering good interest rates on the deposits as well.
Even in the bank deposit investment scenario, the banks offering high interests on deposits will be more attractive than the ones that may be slightly lower, including your existing bank. While the new bank may offer a high return for your deposit, it is ones job to analyse the risk, by looking into their lending’s, lending rates, the promoters of the bank etc…. They may be charging more on the lending’s as well, but if the borrowers defaults, then that’s a concern.
The background of the promoters especially within the private banks is a must to screen through. They may be people from risky financial institutions, they could be a collaboration between a sound financial institution and the other not so sound, but willing to make a larger investment for a lesser percentage share, may be.
In all of the above cases, even if the bank is providing couple of points more on the interest rates from your existing banks, I would question the safety of such an investment. And the answer would be the existing bank, that may be offering a high rate as per its policies and the central banks directive, but more importantly a safe return on investment. So when you end up comparing this way, it is always the high and safe return that qualifies for a good return on investment.
