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Company Fixed Deposit

Mr. Shah is confused over where he should invest the funds of his matured company fixed deposits

Previous company fixed deposits for my son have matured in mid-July 2008. He is in class 11 right now. I would need the funds in mid-2010 for his college admissions. Where should I invest the same? Which mutual fund would give better returns than company fixed deposits, considering the hardening interest rates?
- A C Shah

The interest rate of company fixed deposits varies from company to company and investment tenure. Generally, the rate of interest given by the company is one to two per cent more than what is given by the Bank FDs.

But unlike Bank FDs, which are risk-free, the company FD is not risk-free and carries a high risk of default. You can invest in FMPs, which are more like an FD, but are more tax efficient. Debt funds with low average maturity could also be considered as they carry lesser interest rate risk. Proven funds like Kotak Flexi Debt or Birla Sun Life Dynamic Bond Retail fund can also be a good investment proposition.

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