Safe to Invest in Company fixed deposits?
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As the name suggests, company fixed deposits is a term associated with FDs issued by companies. They are distinct from the FDs offered by post-offices and banks (like nationalised banks for instance). Company FDs are known to offer attractive returns vis-a-vis FDs issued by banks and post offices.
But then the same comes at a price - higher risk. Company FDs are unsecured in nature. Hence, should a default occur, investors would find themselves in a rather unenviable situation. Of course, this doesn’t mean that every company FD is likely to result in a default; all the same, the risk involved shouldn’t be ignored.
Risk-averse investors who accord higher priority to safety of capital and an assured income over higher returns would do well to steer clear of company FDs, especially the ones that don’t carry an ‘FAAA’/equivalent credit rating indicating the highest degree of safety. For such investors fixed deposits from post-offices and nationalised banks may be more suitable.
