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[Discussion] Mahindra Finance Fixed Deposit

dvader

TF Ace
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?
 
If you’re willing to take some risk, you’d be better off buying AAA rated bonds. I just did some research and found out that M&M financial service bonds are AAA rated, secured & senior bonds. So it is relatively safer.
 
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If you’re willing to take some risk, you’d be better off buying AAA rated bonds which will have a coupon rate of around 10%. Go with the bonds that are collateral backed and are issued by PSUs, so it is considerably safe.

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.
 
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.
Totally agree. But most of the tax free bonds have a YTM of 3-5% if bought on the secondary market today, so it works out to be the same as any taxable bonds. The markets are smart and factor in all this.
Unfortunately the government stopped issuing tax free bonds. The only tax free bond(if you can call it that) that are issued today are SGBs. The government is basically throwing away money with these bonds. XD
You are lucky to have had the opportunity to invest in such Long-term, high yielding, sovereign bonds.
 
Totally agree. But most of the tax free bonds have a YTM of 3-5% if bought on the secondary market today, so it works out to be the same as any taxable bonds. The markets are smart and factor in all this.
Unfortunately the government stopped issuing tax free bonds. The only tax free bond(if you can call it that) that are issued today are SGBs. The government is basically throwing away money with these bonds. XD
You are lucky to have had the opportunity to invest in such Long-term, high yielding, sovereign bonds.
i beleive there are other tax free bonds as well which allow reinvestment gains to be held
nabard bonds if i am not wrong
 
just like MBS in 2008 financial crisis were
What? I don't think it's fair to draw a comparison between the two, as that was a different thing altogether. The underlying asset(real estate) was heavily inflated at the time. And at the rate those subprime mortgages were rolled out, it was bound to happen. Especially, when they were carelessly giving loans to delinquent people!
AAA-rated bonds that are secured and have seniority are the golden standard. To be more safe, you can buy into any of the PSU bonds. Basically, they are the least risky bonds that you could invest in.
But if shit hits the fan tomorrow, as per the order of repayments, since the bondholder holds seniority, they would be entitled to the settlement first after the liquidation of the assets(as it is secured/backed by the asset).
Having said all that, yes it is risky. That's why you split your investment across multiple bonds(maybe 8-10), just like a debt MF would, to mitigate some of that risk.
 
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In case of Banks, the combined limit - per customer id - is Rs 5 L. including all FDs/TDRs/RDs/SB/CA.... both principal and interest accruals thereon.

So, it is advisable to keep your deposits in multiple banks - upto 5L in each bank max. And, all this so-called security is available to the customers PROVIDED the said bank had paid the premium to DICGC regularly and there are no defaults or litigation cases pending. DICGC rules also state the difference between various styles of accounts held - single or joint ...... Investing in Co-op Banks, non-Scheduled Banks, Land Mortgage Banks, Regional Rural Banks...... can be done only after ascertaining whether these banks have really taken the DICGC cover or not.
 
So many conjectures on this thread. So many connotations. It's simply just words and they don't even mean the same thing to different people. Such is the nature of finance and financial products. These debates can be endless.

The discussion has gone off-topic for sure. And for those who are interested in these products, my 2 unsolicited cents... please talk to your advisor. Please do not try to be reckless with money. Afterall, its hard-earned. The advisor may get it wrong too, but atleast you followed the right process. I have said this elsewhere as well on this forum. There are no guarantees in finance (other than the sovereign itself). Make what you will of this.
 
So many conjectures on this thread. So many connotations. It's simply just words and they don't even mean the same thing to different people. Such is the nature of finance and financial products. These debates can be endless.

The discussion has gone off-topic for sure. And for those who are interested in these products, my 2 unsolicited cents... please talk to your advisor. Please do not try to be reckless with money. Afterall, its hard-earned. The advisor may get it wrong too, but atleast you followed the right process.
You do realise that you're just adding to the conjectures here, right? 🤣
Anyways, you know what's funny? More than half of the advisors are incompetent. Some are outright ripoff artists. A good proposition of these con artists are plying their trade by affiliating themselves with banks and financial institutions, making handsome commission money in the guise of investment/financial advisors.
If you want to let your money make money for you, you need to put in the time yourself. Otherwise, find ways to turn your sweat equity into more money.

I have said this elsewhere as well on this forum. There are no guarantees in finance (other than the sovereign itself). Make what you will of this.
A sovereign isn't a guarantee either. Look at the condition of our neighbours.
 
More than half of the advisors are incompetent. Some are outright ripoff artists. A good proposition of these con artists are plying their trade by affiliating themselves with banks and financial institutions, making handsome commission money in the guise of investment/financial advisors.
This is true of any profession.

If you want to let your money make money for you, you need to put in the time yourself.
Very easy narrative. Easy to sell too. What are the probabilities?

A sovereign isn't a guarantee either. Look at the condition of our neighbours.
You have bigger issues than worrying about investments when the sovereign guarantee isn't enough.

🤷‍♂️
 
Very easy narrative. Easy to sell too. What are the probabilities?
the odds have been pretty decent
either go in index funds for less expense ratio or try to mirro mutual funds for the long term
You have bigger issues than worrying about investments when the sovereign guarantee isn't enough.

🤷‍♂️
this is the biggest hoax post 2008
if you see the USA debt probably 10 years before interest on their debt becomes a biggest constituent of their budget and then they will end up cutting healthcare and social security or keep printing money which would make inflation much worse.
 
This is true of any profession.
Right. Very plausible argument.
Very easy narrative. Easy to sell too. What are the probabilities?
Who said it is an easy narrative? And trust me, it's not easy to sell(not that I care about doing so). Most people will fail to make proper judgements. The probability of losing your money when you don't have enough knowledge is close to 100%. XD
You have bigger issues than worrying about investments when the sovereign guarantee isn't enough.🤷‍♂️
Well, you're right when you say that though. But you realise how overleveraged most big economies are though, right? Keep this in mind when the Global debt bubble will burst. IT WILL HAPPEN ONE DAY.
 
the odds have been pretty decent
either go in index funds for less expense ratio or try to mirro mutual funds for the long term

this is the biggest hoax post 2008
if you see the USA debt probably 10 years before interest on their debt becomes a biggest constituent of their budget and then they will end up cutting healthcare and social security or keep printing money which would make inflation much worse.
All of this is besides the point, right?

Ballooning debt isn't what I was talking about. The debt is still getting serviced.

There isn't a single mention of index funds out here. We are talking about far more complicated instruments. I can make a safe assumption too that most people have not even read the terms of all the transaction documents that constitute these intruments. Some are calling them safe while others are calling them risky. My point was pertaining to this.
 
The probability of losing your money when you don't have enough knowledge is close to 100%. XD
Thank you for saying that. Precisely what I have been trying to convey.

But you realise how overleveraged most big economies are though, right? Keep this in mind when the Global debt bubble will burst. IT WILL HAPPEN ONE DAY.
Overleverage story is just noise. What are you supposed to do until that ONE DAY? Sit on the sidelines? I guess not. The world has seen enough crisis. Yet here we are. There will be several more to come. That is a fact.
 
In my opinion, Mutual Funds n Index Funds are meant for passive investors - who have money, but no time. And, want market returns but not willing to take risk. They want safety n liquidity and are not averse to less returns.

These does not fit into my scheme of things. So, no investment in these two segments.

Why should I pay for highly inexperienced chaps - called fund managers - who always fleese your funds ? I trade directly n invest directly. No brokers, no advisors, no RMs, no PFMs.
 
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