Investment is often risky but having a long-term plan helps you get the maximum returns on your investments. This also holds true when you invest in fixed deposits (FD).
Recently, two successive repo rate increases by the RBI have provided relief for fixed deposit investors after a prolonged period of low-interest rates.
Fixed deposits offer a high level of safety and stability, which appeals to people looking for a long-term financial solution. Plus, various benefits come with investing in a fixed deposit account, such as earning interest on your deposited money and accessing your funds when needed.
Read on for more details if you want to learn more about the advantages of fixed deposit accounts.
Why investing in a fixed deposit account is a good option?
The following justifications make investing in a fixed deposit account a wise decision:
- Assured Returns & Low Risk
Fixed deposits are a great method to ensure interest and assured returns. This is so that the interest rate on your investment in a fixed deposit is predetermined and does not fluctuate with market conditions.
The risk of losing money is negligible when comparing fixed deposits to other investment options like equities or mutual funds.
Market fluctuations have no bearing on the amount invested in fixed deposits. It offers a guaranteed return, making it appropriate for investors with modest risk tolerance levels.
Additionally, you may use the fixed deposit calculator to determine your total interest earned and the amount you will get upon maturity.
- Loan against FD
One can choose a loan against FD if they require immediate cash due to an emergency. The loan amount is determined using the tenure and value of the fixed deposit. However, carefully analyse whether you need a loan as the interest rates could be higher on such loans.
- Tenure Flexibility
Depending on your investment requirements and goals, you can choose from a variety of tenors for your fixed deposits, ranging from 7 days to more than ten years.
By spreading out your investments over longer periods, you can handle them more easily in the long run, thanks to this flexibility.
Suppose a person has deposited their money in an FD with a bank, and the bank has been placed under a moratorium due to an unusual business shutdown. In that case, the person will be covered under the guidelines by DICGC Act.
The investor may get up to Rs. 5 lakh in insurance within 90 days.
- Good for Diversification
Due to their constant returns independent of the stock market or other investments, fixed deposits are an effective instrument for diversification. This method can be used to build your portfolio without having to worry about losing money during falling markets.
What are the types of fixed deposits?
Here are the types of fixed deposits:
- Regular FD: For people who depend on steady, predictable income, a regular FD is the most preferred plan, which has easy investment criteria and offers attractive returns.
- Tax-saving FD: Tax-saving FDs are secured and flexible plans that provide competitive yields and tax protection under section 80C.
- Senior citizen FD: A senior citizen FD is a financial product created to offer individuals over 60 years a chance to earn more interest each year for the duration of their investment.
- Recurring FD: Recurring deposits are fixed deposits that let you invest a specific sum each month or quarter for a defined duration.
- Flexi FD: The FD that is linked to your savings account is called a Flexi FD. You get better rates and access to liquidity with a fixed deposit linked to your savings or current account.
A fixed deposit investment decision needs to be only made after thoughtful consideration. You can use this to increase the returns on your investment over those you would get from other investing options.
First, there is a wide range in the interest rates that various banks give, which are determined by the economy’s condition and the demand for loans. Before making an investment decision, it is advised to monitor interest rates carefully and compare them with one another to ensure decent returns.
RBL Bank Ltd. is one of the best and most preferred banks for fixed deposit schemes, offering an interest of 6.65% on your fixed deposits.