With a range of equity and debt-centric investments flooding the market, you might be wondering if a fixed deposit remains a good instrument for your savings. However, fixed deposits have long been one of the safest and surest investing options for individuals. An FD investment has numerous benefits and can be a rewarding instrument for investors of all ages.
A fixed deposit offers a safe and effective strategy for you to diversify your portfolio and get a regular source of funds. Fixed deposit rates have always been higher than the interest available on savings accounts, and are easily accessible. Additionally, there are various benefits to FDs, such as flexible tenures, a quick online application process, and comprehensive safety.
Here is a quick look at the various benefits of fixed deposits:
Unlike most current investment instruments, FDs benefit from being completely disconnected from the market. You can be certain that your investment will give you a guaranteed return, determined by the rate of interest your bank offers. Assured returns also help you plan your future as you know the exact sum you will be receiving.
The RBI further protects your interests by levying strict regulations on all FDs. The banking industry is robust in India, and FDs continues to remain one of the most protected investments with guaranteed returns.
As mentioned earlier, the banking industry is immensely fortified in India. FDs, with no links to market ups and downs, only fail to give you returns if the lender itself shuts down. This is a rare occurrence in today’s day and age. To further appease investors, RBI regulations also dictate that all FDs open receive a degree of insurance.
The insurance offered by the RBI should be extremely reassuring and opens you up to making all the FD investments you wish to make without any fears.
Another key reason an FD is a great investment is the steady and promising interest rate it offers. In most cases, savings accounts offer lower interest rates than fixed deposits. Furthermore, several banks give you the option to break an FD without any penalties, which provides you with complete liquidity.
Additionally, senior citizens enjoy higher returns on FDs than regular citizens, making them an even more rewarding investing instrument for those above a certain age.
Most market-based investments such as stocks and Mutual Funds require extensive research and a comprehensive understanding of the instruments. These are time-consuming procedures, and there is no certainty of returns. Thankfully, opening a fixed deposit is a hassle-free and quick process and can be completed in a few clicks.
If you have multiple accounts, make sure you compare and study the interest rates offered before opening one. Additionally, you can set your FD for auto-renewal, ensuring that your investment keeps growing in the long run without any monitoring necessary.
The higher interest you enjoy on FDs as compared to a regular savings account comes from committing to leave the principal amount in your FD account for a fixed period. Banks then use your deposit for themselves. However, more and more lenders nowadays offer you the option to break your FD without any penalties being levied. At the most, your principal will remain unaffected, but you may receive a lower interest rate. Apart from tax-saving FDs, you can close most FDs before maturity and access these funds for emergencies.
Talking about tax-saving FDs, they are a great tool offering investors numerous benefits. In most cases, these FDs involve a 5-year term deposit, and you cannot withdraw your funds for this time period. In return, there is no tax levied on the principal deposited, upto a certain limit.
The taxation benefits, therefore, provide you with an investment tool that gives you guaranteed returns while helping you save on taxes.
Breaking your FD is not the only way to access the funds you have deposited. You can also take a loan against the FDs you have created at a competitive interest rate. This interest rate is usually low as you’re offering the amount present in your FD as collateral.
Certain banks also provide credit cards against the FDs you have opened with them, giving you another credit tool you can leverage as and when you desire.
There is often an argument against investments in fixed deposits, claiming that other tools facilitate higher returns. However, they also involve a higher degree of risk and can adversely affect your investment portfolio. The ideal portfolio contains a mix of risky and risk-free instruments, and you should ensure that you invest in fixed deposits whenever they suit your situation. It is therefore clear, without a doubt, that an FD is a good investment tool even today. Furthermore, Ruloans is here to ensure you get the highest returns possible on your investments.