A fixed deposit is an ideal choice for individuals who are less aware of the capital market. This is because FD is not market-linked, so market volatility has no part in it. The returns are guaranteed while there is very low risk involved.
As an aspiring investor or someone who has no idea about how the market works, FD is a recommended investment option. It is the most trusted way of investing and growing your hard-earned money.
A fixed deposit is a financial investment instrument offered by NBFCs and banks where you can deposit a certain amount of money and get an interest rate, which is usually higher than a normal savings account.
The tenure of your investment can range from little as seven days to a maximum of 10 years or more, depending on the financial institution.
Here is everything you need to know about FD.
When you invest money in the stock market, there is always a high-risk factor associated with the investment. You might get higher returns if the market is booming, and there are also possibilities that the returns are lower.
This is because of how volatile the commodity market or the stock market is.
However, when it comes to FDs, you will get assured returns. They are not risky investments as they don’t depend on market fluctuations.
Here, you are sure that you will get a fixed ROI at the end of the tenure, regardless of the market fluctuations.
The best part is that the FD interest rates are quite lucrative. You will get higher returns on your investments. For example, in a savings account, the interest rate on the amount ranges from 5% to 6%.
In the case of an FD, the interest rate is generally 2-4% higher. So, it is the safest way of saving and growing your wealth.
Depending on your financial goals, you can choose FD tenure. FDs are available for different tenures. Depending on the bank or NBFC, you can choose the tenure for a minimum of one week or a maximum of 10 years.
On the other hand, if you want to avail tax benefits, you can go for an FD with tenure above three years. For good returns, a higher interest rate FD with long tenure is considered the best option.
Most importantly, if you are in urgent need of money, you can easily withdraw the amount from your FD account.
Loan against FDs
One of the reasons why the majority of the people prefer opening an FD is that it also helps in getting a loan. Financial institutions also provide an overdraft facility on the fixed amount.
Overdraft loan works in a way that you don’t have to break your FD before maturity. The interest rates are lower as compared to personal loans, which generally ranges from 14% to up to 30%.
A fixed deposit encourages the habit of saving. In India, you can create an FD account with a minimum deposit of INR 100. You can save as per your requirements and money flow.