Low-interest levels in banks: where to invest then?
Most people in Bangladesh prefer to hold their funds in banks but lower rates of interest on deposits are now turning them away from the risk-free profit generating investment tool.
Presently, the deposit rate possesses declined to typically 4.51 per cent while it was around 6 % a year earlier.
Simultaneously, the country's inflation level rose to 5.32 % in February, reflecting negative returns.
This means that if you keep your cash in a bank where in fact the big difference between the interest rate and inflation rate remains the same, in that case your fund's value would fall by Tk 0.81 for each and every Tk 100 by the end of the year.
However, the number of investment choices in Bangladesh is very limited, according to Mahmood Osman Imam, a professor of financing at the University of Dhaka.
So, where a bank gives a lower interest for saving than its inflation rate, people can either get a cost savings certificate or spend money on the stock market.
But since stocks are a incredibly risky proposition, the general public should avoid building significant investments without initially availing proper knowledge on it, Imam said.
For anyone who is risk-averse, you might choose to spend money on cost savings certificates, namely a five-yr Bangladesh sanchayapatra or three-monthly profit bearing sanchayapatra, he added.
Bangladesh savings certificates give a 11.28 % profit while three-revenue bearing savings schemes include 11.04 % interest.
However, you will find a limit to the amount that can be invested.
The investment ceiling for three-month profit bearing savings instruments is the same, according to the Department of National Cost savings website.
There are two-other instruments: family savings certificate and pensioner savings certificates.
However, only women previously mentioned 18 years and folks aged 65 years and above can purchase the instrument offering 11.52 per cent profit. The maximum limit for a person investing in a family cost savings certificate is Tk 45 lakh.
The scope for investment in pensioner savings certificates, that offer 11.76 per cent profit, is limited to consumer sector employees.
A good person cannot invest a lot more than Tk 50 lakh in three savings instruments: the five-calendar year Bangladesh financial savings certificate, the three-month profit-bearing financial savings certificate, and the family financial savings certificate.
Under joint accounts, the highest amount of investment in the three savings schemes will be Tk 1 crore, a cap aimed at discouraging wealthy persons from putting in too much money in the high-interest-bearing savings instruments proposed by the government.
Imam said some non-bank finance institutions offer higher interest levels but investing in these are risky while many of these companies are struggling to survive.
Another option could be to purchase the currency markets despite its high risk.
But according to market analysts, shares with very good fundamentals and a good track record of dividend declarations could be a choice. If a person chooses the proper stock for purchase, s/he will probably gain.
An investor needs to choose a company which has potential and an excellent history of giving substantial dividends, they said.
If anyone invests in stocks and shares with very good fundamentals for a long-term, he's likely to reap higher benefits, the analysts added.
However, if the person cannot choose where stock to get, open-ended mutual funds managed by decent asset managers could possibly be another option.
Open-finished mutual funds are investment vehicles that gather a fixed pool of money from investors and re-invest them into stocks and shares, bonds and various other assets.
However, it is important to comprehend which funds are very good, Imam said.
"In our region there is no benchmark to understand which one is way better," he added. Bangladesh features 48 asset management corporations that manage 63 open-ended mutual funds.
