SBI Fixed Deposit vs. Buying SBI stock
Hi Friends,
It is well known fact that bank Fixed Deposit rates have fallen to dismal levels (5% - 6%) at present and the returns are no more attractive. After TDS and inflation are taken into account, the amount that you get on your Fixed Deposit after waiting for an entire year (365 days) is pittance. If you are the cautious investor type who does not want to trade various stocks but only interested in fundamentally strongest institutions out there, this alternative idea may appeal to you.
Let's say you have Rs. 1lakh. You are thinking of opening an FD in SBI. Only SBI, because you trust this Bank and feel it is fundamentally a strong institution and backed by Government. Now since you trust this Bank so strongly, why not buy the stock? After all, when you are okay with receiving 5% returns from SBI after waiting for one whole year, anything more than that in the same time period should give you greater satisfaction, right?
This chart clearly shows that it required only 20 days for SBI stock to give over 10% returns bettering its own Fixed Deposit rate. You can clearly see that it has been able to give better returns (20%, 23% and 10%) on three occasions since November 20 to June 21, in much shorter span of time.
So, the moral is if you have cash, put it in a Fixed Deposit that you can prematurely close anytime. Keep watching SBI for a buying opportunity. When that comes, break your Fixed Deposit and buy SBI stock. Hold it till the returns surpass Fixed deposit rates. Then, if you wish, sell it off and put the money back in Fixed Deposit.
An idea worth considering for the conservative investors out there who do not want to actively trade but keen on getting better returns on their investments.
As always, please do your own due diligence on all investments before you act.
Queries / Feedback welcome.
All the best to all.
Regards
PriceCatch
It is well known fact that bank Fixed Deposit rates have fallen to dismal levels (5% - 6%) at present and the returns are no more attractive. After TDS and inflation are taken into account, the amount that you get on your Fixed Deposit after waiting for an entire year (365 days) is pittance. If you are the cautious investor type who does not want to trade various stocks but only interested in fundamentally strongest institutions out there, this alternative idea may appeal to you.
Let's say you have Rs. 1lakh. You are thinking of opening an FD in SBI. Only SBI, because you trust this Bank and feel it is fundamentally a strong institution and backed by Government. Now since you trust this Bank so strongly, why not buy the stock? After all, when you are okay with receiving 5% returns from SBI after waiting for one whole year, anything more than that in the same time period should give you greater satisfaction, right?
This chart clearly shows that it required only 20 days for SBI stock to give over 10% returns bettering its own Fixed Deposit rate. You can clearly see that it has been able to give better returns (20%, 23% and 10%) on three occasions since November 20 to June 21, in much shorter span of time.
So, the moral is if you have cash, put it in a Fixed Deposit that you can prematurely close anytime. Keep watching SBI for a buying opportunity. When that comes, break your Fixed Deposit and buy SBI stock. Hold it till the returns surpass Fixed deposit rates. Then, if you wish, sell it off and put the money back in Fixed Deposit.
An idea worth considering for the conservative investors out there who do not want to actively trade but keen on getting better returns on their investments.
As always, please do your own due diligence on all investments before you act.
Queries / Feedback welcome.
All the best to all.
Regards
PriceCatch
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