Dividend yield vs interest yield

I read an interesting article published in the Financial Express on October 24 last and feel obliged to write to you. The dividend yield at current prices is below the interest yield of a risk-free bank deposit. So, there is no risk premium in a saver being an investor. For example, if a saver is getting 21 per cent from bank deposit, why would he invest in shares at prices that gives dividend yield of below 4.0 per cent. About bank investments, banks pay depositors at 12 per cent. Deposits are liabilities of a bank. The 12 per cent is cost of liability. Banks make assets by lending. They charge interest on assets at cost plus basis. If the banks invest in stock market and receive the yield of less than 12 per cent which they will at current prices, banks' income will be challenged. If the banks risks increase from this, and chance of failure to refund deposit and interest arises. Banks will fail. At higher prices dividend yield will be lower. Another important point is that persons who buy and sell shares daily to make profit are not investors. They are traders. Investors do not gear up in stock markets by margin loans. Traders do. There are no investors in those who take margin loans for trading. Trade causes profit and loss. Traders should be discouraged from margin loans, as their activity causes volatility. Ferdous Khan FCA Octokhan Chartered Accountant