Earning isn’t enough – one must also invest for the future!
There are various investment options like stocks and mutual funds to grow your money, but they also come with inherent risks. Market volatility can lead to fluctuations in fund values, impacting your returns. Moreover, poor fund management may cause financial disappointment and pecuniary loss.
A fixed deposit (FD) is a popular investment option that is ideal for the risk-averse investor. An FDis a safe investment that is made through banks or other financial institutions. Funds are invested for a specific period at a predetermined interest rate. Guaranteed returns, high interest rates, tax benefits, and financial stability – the benefits of FDs appeal to seasoned investors and those seeking a low-risk, steady growth strategy.
Learn more about the advantages of an FD investment.
Benefits of Fixed Deposit Investment
1. Steady and Guaranteed Returns
Unlike the volatile stock market, where your return on investments may fluctuate wildly, FDs provide a fixed interest rate for the entire deposit tenure. This stability makes FDs an excellent choice for conservative investors looking for a predictable income source.
2. 100% Safety and Security
Most banks and financial institutions offer FDs insured by the government up to a specific limit (INR 5 lakhs in India). So, in the unlikely event of the bank facing financial difficulties, your investment remains secure.
3. Attractive Interest Rates
As the deposited funds are locked in for a specific period, banks use FDs for stable funds, enabling them to offer higher interest rates, while savings accounts have to offer customers immediate access to funds, leading to lower rates.
4. Variety of Tenures
FDs come with a wide range of tenures, ranging from a few days to several years. This flexibility helps you choose a term that matches your financial goals. You can also choose to receive the interest pay-outs at monthly, quarterly, half-yearly or yearly intervals, or at maturity.
5. Higher Interest Rates for Senior Citizens
After retirement, when there is no source of income, senior citizens can rely on the fixed-interest earnings from their FDs. As the FD interest rates for senior citizens are higher, it is a wise investment decision for the future.
6. Tax Benefits
In India, the interest earned on FDs is subject to tax. However, some tax-saving FDs (with a lock-in period of 5 years) offer deductions under specific sections of the Income Tax Act. Thus, you can open a tax-saving FD and reduce your tax liability while steadily growing your investment.
7. Automated Renewals
Many banks offer the convenience of automated FD renewals. When your FD matures, the principal amount and the interest earned can be automatically reinvested in a new FD at the prevailing interest rates without requiring any action on your part.
8. Secure a Loan
If an emergency arises, you can use your FD as collateral to secure a loan from your bank. Banks offer a percentage of your FD balance as a loan amount.
9. Instant Account Opening
With online banking, you have the convenience of opening an FD account from the comfort of your home. Open your FD online with these steps:
- Register using a mobile number
- Submit PAN and Aadhaar card details
- Mention the principal amount you want to depositand complete your video KYC process.
Fixed Depositsare simple to understand and offer advantages like stability, security, and predictability. Locking in the invested amount for a fixed period reduces the likelihood of dipping into your savings for impulsive expenses, thus helping you build a stronger financial foundation.
Open an FD online and take advantage of the myriad benefits it offers.