Fixed deposit is one of the most popular and preferred investment options for an individual in India. Almost everyone like fixed deposit may be because it offered an assured return and safety of capital. However, people may not be aware that they are losing a lot of money by not ignoring stock market investment. Let’s take a look at How same bank shares had given better return compared to bank fixed deposit.
Fixed Deposit Vs Investment in Same Bank Share
Take one hypothetical example of two friends Ravi and Raj. They had a surplus money 5 Lakh. They were looking for good investment option. They both went to “Yes Bank” for investing money. The advisor from the bank has suggested two options to them.
Option- 1- Invest money in bank fixed deposit and enjoy fix return. Safe Investment Option selected by most of the investors.
Option -2 – Invest in the stock of Yes Bank.Risky Investment Option not preferred by most of the investors.
Ravi had taken a conservative view and invested in bank fixed deposit for 10 years. The year of Investment was 2007 and at that time YES Bank was offering fixed deposit @ 9% for 1 to 2 years and @10% for the long term – 10 years and above.
Raj was a smart investor. He had some knowledge about Financial Market and Economy. He has done a study and concluded that growth of India is not possible without banking sector.
Raj decided to go ahead with an equity investment and he purchased shares of Yes Bank. Total 3546 shares were purchased @ 141 per share (as on 1st March 2007). Total investment was 5 Lakh.
After a long time, Ravi and Raj met in Surat on the occasion of their friend’s son marriage. Ravi came first and waiting for his friend Raj.
After few minutes Raj came in his Skoda car. Ravi was surprised and asked “How have you become so rich Raj? You have won any lottery or what?”
Raj replied, “No I didn’t win any lottery do you remember one day we went to the bank?”
Ravi replied yes. Then Raj said you invested in bank Fixed Deposit and I purchased Shares of the same Bank @ 141 and I got total 3546 Shares of Yes Bank.Ravi replied yes.
Raj said “As you know that I have got 3546 shares of Yes Bank in my portfolio in the year 2007. I recently sold all these stock @1440. I got total 51 Lakh from these shares.
3546 Shares x 1440 Rs = 51 Lakh
I could able to buy a car and purchase a flat for my family with this 51 Lakh. This investment has helped me a lot.
In addition to that, I have earned very good dividend payout in last 10 years. Total dividend payout was 1.45 Lakh.
So, I was able to make 52.45 Lakh from 5 Lacs in last 10 years. 10 Times growth on my capital investment. What about you Ravi?
Ravi says with sad feeling 🙁 nothing much it’s just around 13.42 Lakhs. Just one-forth of your earning. Not only that I have to pay TDS on this amount. So, I final amount was 10.8 Lakh.
So, this is the story of every common man of India who does not know how to invest, he simply puts money in fixed deposit like Ravi, as they don’t know the power of the stock market.
If you are a smart investor with good risk taking capacity and ability to do research in the stock market. I advise you to go for stock investment instead of bank fixed deposit.
Happy Investing and Keep Smile.
Note – The story mentioned above is a fictitious story. The intention of this post is not to compare fixed deposit and stock market, both these options are opposite to each other and made for a different type of investors. The purpose is to show selection or right stock can give you good return to the investor.
Deposits in Bank Fixed Deposit VS Investment in Same Bank Share