A recent survey conducted by SEBI showed that approximately 95% Indians preferred investing in fixed deposits as opposed to mutual funds and other saving deposit schemes. Volatile market conditions and altering economic policies pose a risk to your investments; however, a fixed deposit is one such financial instrument that guarantees returns.
So, you are assured of regaining both your investment amount and the interest that was locked-in at the time you started your FD. Compared to other savings instruments and deposit schemes, the trust quotient attached to fixed deposit is very high.
Thus, choosing a good FD Scheme on a high interest return with a decent compounding frequency will allow you to grow your invested sum.
Here are a few ways in which a fixed deposit stands out among other deposits like recurring, current and savings account, and mutual funds:
Fixed Deposits Lock-In Your Investment until Maturity
Fixed deposits belong to the category of ‘time deposits’ much like recurring deposits and mutual funds. All time bound deposits accumulates an interest on the invested sum within your chosen term. Barring FDs, investment into the other deposit schemes can be carried out through monthly deposits until maturity. But the one-time investment for a fixed deposit helps you lock-in your saved amount till maturity.
This is beneficial because not only does the principal accumulate a high interest, but choosing a longer tenor also allows you to gain from compounding. The interest rate on FDs varies all across financial institutions and generally falls in the category of 7-8% interest per annum. Also, the tenor for deposit can be chosen within a time frame of 12 to 60 months.
Fixed Deposits Can Be Used To Generate Regular Income
Demand deposits or depositing cash into your savings and current accounts ensures flexibility for your money. You can withdraw what you deposit any time, by visiting a bank or through the ATM. The cash withdrawn helps you fund your regular needs, while deposits into demand accounts helps you gain a 4% interest on your savings. But this does not suffice as a big corpus of funds, and nor does it contribute much towards an additional income, even though an interest value is attached to the deposit.
However, you can seek both flexibility and income using your non-cumulative fixed deposit. Invest on a sum by choosing a long maturity tenor and a good compounding frequency. By choosing a non-cumulative FD you get the payout at your chosen frequency all through the tenor.
Fixed Deposits Give Senior Citizens Higher Earnings
As per prevailing RBI norms, financial institutions offer senior citizens at least 0.35% higher interest on their fixed deposits. So to take the maximum advantage of this, you should look for the most competitive fixed deposit offering in the market. You can choose Bajaj Finance, as they offer Senior Citizen Fixed Deposit at 8.20%, which qualifies as one of the highest interest offerings by any financial institution in India. Apart from that, the security factor attached to a Bajaj Finance fixed deposit is very high as it has been awarded ICRA’s MAAA (Stable) Rating and CRISIL’s FAAA/Stable Rating.
Fixed Deposits Provide You with the Benefit of A Loan
Owing to the lock-in period for maturity, the sum invested in an FD stays secure. This factor makes your fixed deposit a valuable asset. During financial urgencies, instead of breaking the fixed deposit, pledge the same to avail a loan. This will keep your investment safe, and get you a high-value sanction at low interest.
So, decide on the amount you want to invest and then use a FD Calculator to compute the return based on the varying tenor and interest rate. Then invest in a FD, one of the most lucrative low-risk financial offerings in the market.