Ash.Paul
Statutory Insurance is guarantee of principal of upto Rs. 1 lac in case of a bank default/bankruptcy...
For completely risk off investing, diversified bank FD's are the best bet, and co-op bank FD's a complete avoid.
(There are cases of money being swindled off by promoters, who disburse depositors funds to themselves, and then join a political party. Nothing will happen to them - they are safe, and the money looted is given a warm welcome in the political party in this case, Pravin Darekar embezzled 123 odd crores and caused bankruptcy of Mumbai District Central Co-operative bank, joined BJP)
Why would one even think of investing in a co-operative bank for extra 1/2-1% return, when the whole principal amount is at risk?
The gauge or standard of safe entry would be PE (Price/Earning) ratios. With little downside, and a greater upside, one can easily beat the FD returns with a great sense of safety.
Also, if looking for returns, one can go back into history and invest a portion of savings in equity in times of panic and scare. This is the Year Avg returns based on PE Multiple :
PE RETURN
Upto 12 55%
Upto 15 28%
Upto 18 20%
Upto 21 06%
Upto 24 -9%
Above 24 -27%
The current PE for NSE is 23.63%
Am by no means advocating equity investments, just presenting facts...
Good luck.
Thanks DSM for the helpful advise,
In my little experience, Most Index or Equity Linked Instruments have failed to average a annualized returns of 10% return on a 10-20 years period and sometimes the standard deviation is bit too high which makes the investment quite risky and whats the point when like you have said AAA banks are offering 8% steady return hassle free I would say no need to worry about exits and entry.
I agree anything can default in that case RBI will only protect only 1 lac INR, is that correct but I hope the probabilities of having that overnight are relatively very low.
I must say Tax benefits are relatively better in case of Mutual Funds etc.
Would you kindly explain what you meant by Statutory Insurance cover by Financial institution?
Thanks