Reinvestment Risk: How To Buckle It

When interest rates on fixed deposits slide, consider other options like equity and gold to fetch long-term regular income

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In 2002, Mr Iyer decided to take voluntary retirement. Still in his early 50s, and a banker with a public sector bank, he first calculated how much he needed for his monthly expenses. He also budgeted other expenses like healthcare and costs of his daughter’s higher education. Being an experienced banker, he was meticulous with numbers. He decided to invest in a fixed deposit and in bonds.

Iyer’s fixed deposit was for five years while the bonds were of 10 years. With more than two-and-a half decades of banking experience, his planning was thorough. After all, he had been familiar with both interest rate movements and corresponding inflation.