Fixed deposit is a financial instrument offering for banks and non-banking financial companies whereby a customer deposits a lump sum for a fixed tenure at a pre-agreed interest rate. Fixed deposits yield higher interest rates and guaranteed returns when compared to savings accounts. Hence, fixed deposits qualify as low-risk investment. Upon maturity, the investment is paid back along with the interest earned. Fixed deposits come with a suite of options ranging from flexible tenure to withdrawals after maturity and renewal upon maturity.
Why To Invest in Fixed Deposits?
Guaranteed Returns – Unlike with stocks or mutual funds, FDs do provide guaranteed returns, and therefore they are perfect for the very cautious.
Capital Protection – As the principal will remain intact, the risk of financial loss is now reduced.
Flexible Periods – The tenures can range from a few months to years based on the need of the investor.
Liquidity Options – Though basically long-term, FDs have options for premature withdrawals (subject to slight penalties) as emergency funds.
Tax Benefit – Some top fixed deposits like tax-saving FD, provide deductions under section 80C of the Income Tax Act.
Loan against FD – The banks give loans against Fixed Deposits and give it as a financial cushion without breaking the deposit.
Senior Citizen Benefits – As senior citizens get a higher interest rate, FDs act as one of the attractive options for retirement planning.
Things to Consider While Choosing Fixed Deposit?
Check the interest rate trends of the different banks and financial institutions.
Tenure – Choose a tenure that meets the financial objectives.
Premature Withdrawal Terms – If you break an FD account before maturity, these are the terms and penalties for early withdrawals.
Tax Considerations- These are called savings FDs. Opt for them if you’re looking for tax benefits.
Credit Ratings- Only go for institutions that have high credit ratings for enhanced safety.
Fixed Deposits vs. Other Investments
There are FD’s that are low-risk, but the risk involved in investments such as mutual funds, stocks, and bonds are quite high but guarantee greater returns. Balancing between the two makes your portfolio complete, security, and growth aspects wise.
Conclusion
Fixed Deposits are the preferred option for conservative investors who want safety and guaranteed returns. Fixed deposits do not give the highest return as compared to equity investments, but they will provide safety for your money, liquidity, and tax benefits. Fixed deposits are a very good investment avenue for short-term savings investments and long-term preservation of wealth.
For helping you get the right Fixed Deposit according to your financial needs, Chanakya Investments Direct connect to experts can help you make the correct decision for a secure financial future.
