Claudius in the Shakespearean play, Hamlet, should have, perhaps, said in accordance with current times: “When anxieties arrive, they arrive not in single spies but in battalions! “With job uncertainty on the one hand and volatile financial markets on the other, it is natural for us to be over-inquiet about the world around us.
It is in this context that we answer the question of a reader: How secure are bank deposits in these uncertain times? In this article, we demonstrate that there are no secure investments and that risk trade-offs are part of your investment decision.
Protecting your nominal capital is not one safe investment. Instead, it’s one that will help you accumulate money with zero risk at the appropriate cost.
Suppose you have to receive a compounded annual return of 4 per cent to reach your target of eight years, the best investment will be a cumulative bank deposit with zero default risk. Unfortunately, all banks bear risk of default, although small. That means no safe investment! Hence, you can aim for minimally risky investments.
You may be aware that SBI, ICICI Bank and HDFC Bank have been identified by the Reserve Bank of India as systemically important banks in the home. Although these banks may reduce the level of anxiety on a default risk, the interest rates they offer may not be fancy.