Fixed Deposits in Companies that earn a fixed rate of return over a period of time are called Company Fixed Deposits. Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits.
Like most investment option, Company Fixed Deposits are a mixed bag. Company FDs can be an interesting investment option if you know how to select the right FD, and how to avoid the no-so-good ones. Here are some of the points that investors should keep in mind.
Spread your Risk: The deposits should be spread over a large number of companies engaged in different industries or with Higher Rating. This way, you'll be able to diversify your risk among various industries/companies. Try not to put more than 10% of your total investments in one particular company. Choose the Right Period of Deposit to match your need or Goals Periodic Review : The performance of the companies should be reviewed at maturity. This will help you decide whether to renew or reshuffle the deposit. It is also wise to keep a track of these companies by checking their share prices, annual reports and other details reported in newspapers.
Rating: Rating is an immediate tools for the General Investors to identify the risk /return reward of the company