Things to know before investing in company FDs

A large number of companies are coming out with fixed deposits (FDs). The move helps them get easy funding in a difficult economic situation. The returns are certainly mouth watering, since some give a rate of interest as high as 12,5 percent, notes a report in The Economic Times today.

But before getting lured into investing in these company FDs, there are a few things you need to keep in mind.

For instance, the risk your capital will be exposed to. You need to check whether the company is in a position to pay the interest and principal amount as per schedule.

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To check these parameters, you need to know the details regarding the future profitability of the company. For instance, after the central bank put a number of restrictions on import of gold, the future of many jewellery companies has become uncertain. So investing in FDs of such companies may not be a good idea.

An important thing to keep in mind, is that higher the returns the FD promises, higher the risk it comes with. So, ask yourself if you are willing to take that kind of risk?

While a large number of companies are coming out with FDs, many are first timers in the market. This means they don’t really have a track record that you could rely on while deciding on investing with them. So, if you really want to invest in company FDs, it makes sense to stick to reputable companies. Read the full ET report here.