Considering the Fixed Income Scheme as safe, you are investing money, but you are not able to pay attention to inflation-adjusted returns while investing. Read the full news here in detail.
Inflation And Actual Return on FD: If you are thinking of investing your money, then this news can prove to be useful for you. It is known that the condition of the capital market is bad due to inflation at the global level. See how inflation will affect your actual returns.
See Real Rate of Return
Some people are investing money in the Fixed Income Scheme considering it as safe in the market. Also, he is unable to focus on inflation-adjusted returns while investing. In such a situation, when you can understand the real rate of return from the annual inflation rate.
Understand Real Rate of Return on FD like this: Calculator
Real Rate of Return = [(1+Nominal Rate)/ (1+Inflation)] -1
State Bank of India
Interest on 5 Year FD: 5.50 percent
Current Inflation Rate (CPI): 7 percent
Real Rate of Return: [(1+5.50)/ (1+7)] -1 = -1.402
Bank of Baroda
5 Year FD Interest: 5.50 percent
Current Inflation Rate (CPI): 7 percent
Real Rate of Return: [(1+5.50)/ (1+7)] -1 = -1.402
Interest on ICICI Bank
5 Year FD: 6.10 percent
Current Inflation: 7 percent
Real Rate of Return: [(1+6.10)/ (1+7)] -1 = -0.8411
HDFC Bank
5 Year FD Interest : 6 percent
Current Inflation 7 percent
Real Rate of Return: [(1+6)/ (1+7)] -1 = -0.9346
Interest on Axis Bank
5 Year FD: 5.75%
Current Inflation Rate (CPI): 7
Real Rate of Return: [(1+5.75)/ (1+7)] -1 = -1.1682
Keep these things in mind,
you should know that you are in profit in the fixed income scheme giving 5 to 6.5 percent return. Keep in mind that whenever you choose an option, see whether it is getting more interest than the current inflation rate. The inflation rate is 7 percent and the interest rate in a scheme is 5 to 6 percent. So it is clear that the real rate of return will be in the negative.
