Almost every one of us has a savings account. While a savings account gives you the benefit of liquidity, knowing your money is at your disposal, it earns a meagre interest. This interest could be lower than the rate of inflation, thus giving you little or no value in terms of growing your money.
Which is why, you as an investor should look at other fixed income instruments that can help you grow your wealth, at the same offering considerable safety of your money. This is where a fixed deposit or FD comes in. It has been the most popular savings instrument among Indians and there are many reasons why. Let us see in detail.
When you deposit a lump sum of money for a specified period with either a bank or a non-banking financial institution at an interest rate specified by them, it is termed as a fixed deposit. The rate of interest varies from one financial institution to another, however, it is higher than a traditional savings account in a bank.
As soon as the money is deposited, it starts earning interest based on the time frame of the deposit. A fixed deposit, by virtue of its name, means that money is locked in for the time period as specified by you and cannot be withdrawn before maturity. However, should you choose to make a withdrawal, it would attract a penalty that needs to be paid.
You need to be a resident Indian citizen to open an FD. A Hindu undivided Family(HUF), a family trust, clubs, societies, associations, sole proprietors, partnership firms and companies including group companies can also open a fixed deposit.
You can choose between two options depending on your financial goals. You may either want regular interest income or simply be looking at growing your wealth for a specific tenure without any need for regular income. Accordingly, you can choose the kind of FD from the ones below:
Cumulative fixed deposit: In this FD, the interest that you earn on the principal amount is compounded annually. This means that you can grow your wealth steadily and get the entire amount paid out at maturity along with the principal. Since there are no periodic payouts, you have a better chance at benefitting from the power of compounding to increase the value of your money.
Non-cumulative fixed deposit: Unlike the earlier one, in this FD, the interest that you earn on your principal amount is paid out at regular intervals as per your requirements. This could be monthly, quarterly, half-yearly or annually, as specified by you. It is ideal for those looking for regular income at specific intervals.
On Finserv MARKETS, you can easily apply for an FD online right from the comfort of your home either on your smartphone or laptop. Log on to the website and fill your personal as well as beneficiary details. Then choose the amount you want to invest, type of plan and its duration. Upload the necessary documents required.
Once you have filled the form and submitted the documents, proceed to pay the FD amount either through or your debit card. This completes the application process. You can track your FD anytime and anywhere at the click of a button.
You can choose to either renew or withdraw your FD upon maturity. While renewal can be easily done online, the maturity amount is directly credited to your bank account. So, select the best fixed deposit for you depending on the duration you want to stay invested in as per your convenience.
Go for a higher rate of interest and possibly a longer tenure to get the best out of your money. Sit back and let your money grow in a fixed deposit, while it is protected from market fluctuations giving you capital protection like no other savings instrument.