Achieving financial freedom requires investing money wisely. When you retire, possibly you won’t have an active source of income to rely on, therefore, you’ll need a big corpus to handle your needs. One can select from a variety of investment opportunities to increase their money. As market-linked instruments carry risk, those who want to take a low level of risk, choose Fixed Deposits (FDs).
FDs are conventional financial instruments that many individuals choose because of the safety and security they provide. Read on to find out more about investing in FDs if you’re considering doing so.
What is a Fixed Deposit?
An FD is an investment opportunity offered by banks or Non-Bank Financial Companies (NBFCs) that offers investors a greater interest rate than a typical Savings Account up until the specified maturity date. FD allows you to deposit a set amount at a predetermined interest rate for a predetermined time. Each financial organisation has its own rules. Therefore the interest rate on an FD can change.
FDs prohibit early withdrawal of funds. Due to this restriction, several Banks provide FD customers with extra services, including loans secured by FD certificates at competitive interest rates.
In times of economic uncertainty, banks can offer lower interest rates. You can select FDs with terms ranging from 1 week to as long as ten years.
Why Should One Consider FDs as Their Investment Choice?
Even though investments are often adapted to our requirements, objectives, and ambitions, there are a few financial instruments that are necessary for any portfolio. And an FD is undoubtedly one of these plans. Although there has been much written about this conventional investment, it continues to be one of the best options you could have in your investing portfolio.
Here are five reasons you should make the move, whether you have long invested in FDs or are just thinking about it.
This is one of the primary reasons why FDs are among the most often used investment strategies. An FD is unaffected by market volatility, in contrast to investment alternatives related to the market, such as stocks. Your FD corpus is a fantastic approach to guarantee the safety of your wealth as they have minimal volatility. This indicates that the interest rates on FDs won’t change during their maturity. It makes planning for financial goals simple since the returns you will get after the FD matures are guaranteed.
Flexible Tenure and Withdrawal
An FD Account’s term is entirely up to the account holder to choose. Depending on the bank or NBFC, an FD’s minimum period could vary between seven days and ten years.
Unlike certain investment options, such as Tax-Free Savings Plans, which do not allow investors to withdraw assets in the mid-term, FDs offer a great deal of flexibility in this respect. You can access the funds before your deposit matures if you experience a financial emergency. Banks can impose some small fees on early withdrawals, but the money is still easily accessible in times of financial emergency.
Loan Against FDs
FD Investors can profit from this further advantage as well. You can always ask for a loan against your Fixed Deposit Accounts, if you have one. If there is ever an emergency, you do not need to terminate your FD immediately. Alternatively, you can borrow against your FD and keep collecting interest.
Depending on the Bank, different loan amounts are available, but you can get cash instantly. You can often get up to 90% of your FD as a loan with banks and NBFCs.
One-Time Effort with Tax Benefits
Once you’ve made an FD investment, you can relax knowing your money is safe. All you need is to invest a large sum of money, and you can observe your investment grow for whatever length you need.
You can even receive tax benefits if you open a Tax-Saving FD with a five-year lock-in term. You can claim up to Rs 1.5 lakh from your FD under section 80C of the Income Tax Act, 1961.
Attractive Interest Rates
Your money can generate more interest if you place them in an FD instead of a standard Savings Account. It is currently a perfect opportunity to invest in an FD because of the growing interest rates brought on by recent market events. Additionally, the correct FD instrument will undoubtedly let you maximise your return on investment. You can earn more income with Corporate FDs because they often have higher interest rates than other banks.
The Wrap Up
Investing in FDs is more swift, feasible, and hassle-free than other investment choices. As it safeguards your cash while actively producing income on the amount invested, It is regarded as the finest choice for accomplishing immediate financial goals. Many people use FD investments to meet short-term objectives like buying a car, saving money for a trip, purchasing an electrical device, etc.
If you open an FD at the same bank where you already have a Savings Account, you will require little to no documentation. These FDs are also connected to your Savings Account, making it simple to put any extra funds in FDs from your bank account.
So, FDs satisfy all demands, whether you’re seeking security, certainty, or the simple comfort of returns and perks, making them an ideal choice for all types of investors. Additionally, this instrument’s universality ensures that it can fulfil various needs of various investor types. FDs come to your aid if you have a low-risk appetite and want a safe and secure means to make higher returns or if you are a high-risk investor who only wants to cap your invested cash.