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Sinking Fund: Good or Bad

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I think a sinking fund is a good idea. It places funds to the side gradual just in case an investment doesn't work out. We would all like for our investments to work out but unfortunately they don't. It may not be an attractive feature because when we invest our money we would like to think we are going to make money. It's kind of like a savings account in a way. The money is put there gradually so that is builds overtime, and is there just in case we need it.

Explain why you think a sinking fund is or is not a good idea. Thank you

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This response discusses whether investment in a sinking fund is a good investment or not. This is explained in about one page.

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Sinking Fund
Sinking fund is not a good idea as it costs to our money as it does not provide a significant return to the investors. The return from the sinking fund is limited around to a bank term deposit rate and the interest earned on this fund is also taxable, which causes a decline in the value of investment (Rattiner, 2008). The sinking fund generates fewer earnings and out of this a major part goes in the form of tax, which makes sinking fund a bad idea.
Similarly, the money in the ...

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  • M.Com, University of Ajmer
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