Guaranteed Returns in Falling Interest Rates – Edelweiss Tokio Life – GCAP

Guaranteed Returns in Falling Interest RatesToday I wish to discuss one very important thing for the investors who prefer to invest in Fixed Income securities. In India there a large chunk of the population is still away from the capital markets. They do not prefer to invest in capital markets even through equity oriented mutual funds. These are the people who believe in the contracted or guaranteed returns. Yes, they do not believe in investment returns based on market conditions and market risks.
Of course, I do not want to be judgmental, whether these people are correct or wrong. Because if they seek any guaranteed returns plan for their hard earned money, then their point of view is justified. Interestingly the good interest rates is the only big hope for these people, so that they can get the guaranteed returns on their investments. And these people mostly invest in the simplest investment avenue and i.e. Bank Fixed Deposits. Yes. That is right. But there are two serious problems with the Investments in Bank Fixed Deposits. One is obviously Tax. Bank interest is taxable, so the post tax returns are even reduced. Second problem is falling interest rates.Suppose, a person is investing in Bank Fixed Deposit for the tenure of one year for interest rate of 7% p.a., then after one year if the overall interest rates fall then the next year if he wants to re-invest, then he will get even lesser returns. Okay but one can say that if the interest rates increase, then he will get more returns also.
But in today’s competitive world there is reason to believe that Interest rates in India will fall drastically in near future. The interest rates in developed economies are around 2% to 3% p.a. At some places they are even 1% or lesser. Even in fast growing Asian economies like China, Thailand and South Korea also interest rates are coming down to less than 5%. Secondly in the post de-monetization era, there is more inflow of money into banking system, so there is indication that interest rates in India will also have sharp downward trend.
Okay so having said that what are the investment avenues available to the risk averse investors which will fulfill their three basic needs of protection,wealth accumulation and wealth enhancement. Fortunately there is one interesting product that can take care of  all these three needs of the investors. And it is Edelweiss Tokio Life – GCAP. Yes! Friends, Being a Chartered Accountant and Finance Blogger, I continuously and consistently explore for the new and unique investment avenues, to share through this blog. And during that process, I found this very useful product for the people who seek guaranteed returned plans.
The most important benefit of the Edelweiss Tokio Life – GCAP is Guaranteed Returns. Yes. This product guarantees the return for the longer term like 10 years, 20 years or 30 years. So even there will be sharp fall in the interest rates, the investor ‘locks’ the guaranteed interest rates for such long tenure. So in other words, interest rate risk of the investor is taken care. For all these three tenures interest rate guaranteed is more than 5%. Can you foresee the situation where after some years interest rates in India may hover around 4% but still you will get guaranteed return more than 5%!! Secondly and most importantly the investor will also get the tax benefit under 80C of the Income Tax Act. And even tax exemption u/s 10(10D) of Income Tax Act. So effectively the post tax returns may touch around 6% to 7.75% depending on the tenure. These are definitely very good returns for such a long tenure. And of course there is Life Insurance Cover also to protect.
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Friends, I hope this article was useful to you, and if yes you would love to share it!

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