Companies you mustn’t invest in
1.New companies which have yet to prove their financial and managerial expertise, or which have not declared a dividend.
2.It is best to avoid private limited companies, and partnership firms. Such companies are under no obligation to publish their working results and it is therefore very difficult to judge their performance and ability to meet their obligations.
3.Companies whose balance sheets show accumulated losses.
4.Companies which claim to pay a rate of interest higher than 10% to 12% p.a. , unless this is due to frequency of compounding.
5.Companies with a poor liquidity position,
6.Companies which are not paying regular dividends to their shareholders.
Do not renew your deposits automatically
Never renew your deposits automatically without first asking for a refund of the matured amounts. A timely refund establishes the credibility of the company in honoring its commitments.
Check CRISIL or ICRA rating
Look for the CRISIL or ICRA rating. The Credit Rating and Information Services Ltd (CRISIL) and Investment Information and Credit Rating. Agency of India Ltd (ICRA) rates various company deposit schemes. Invest only in highly rated companies.
You should also keep in mind that CRISIL may revise its ratings from time to time. CRISIL put the following companies on rating watch from time to time.
Diversify Your Deposits.
Don’t put all your money in any company, no matter howsoever sound it may be. Things can, and do, change. Though Nirlon was a blue ship company in early 80’s , later it became a defaulter.
Give preference to local companies
When you are investing in company deposits, give preference to good companies in your state, city or town. So far as possible, do not invest in companies which are located far off. If it is a local company, you can personally visit and try to get your money back as soon as you hear of any cash-flow problems. Remember the words of Theodore Roosevelt: ‘Nine- tenth of wisdom Consists in being wise in time’.
