A fixed deposit is considered one of the most effective and easy investment options in India. Under a fixed deposit, you can park your funds for a predetermined tenure to earn a predetermined rate of interest on the savings. This rate is not affected by market fluctuations for the term of the fixed deposit. Therefore, these financial instruments are deemed one of the best investment options in India by the risk-averse individuals who seek stability and assured returns from their investment. Since the principal amount is returned as it is, FDs preserve the capital amount. As we ponder over the question of how to invest for future, parking the savings in fixed deposits seems like the safest and most prudent decision.
Often referred to as term deposits in the financial parlance, fixed deposits bring you both stability and attractive returns. Nowadays you can even opt for the online investment route to get a fixed deposit through Finserv MARKETS.
A few reasons behind the allure of fixed deposits:
If fixed deposit comes to mind as a safe option when you think of how to invest for future,
You are not alone. In fixed deposits, you are assured a return. This interest rate is determined before the fixed deposit is finalised, and the rate may depend upon the tenure and prevailing rates in the economy. Finserv MARKETS offers best-fixed deposit interest rates in India, with interest rates ranging from 8% which can go up to 8.95%. In this context, senior citizens score a benefit. Finserv MARKETS offers fixed deposit rates for senior citizens that are as high as 0.35%, over and above the existing rates.
FDs allow you to choose how you wish to receive interest. This presents you with two options when you make online investments: Cumulative and Non-Cumulative fixed deposits. In the case of Cumulative FDs, the interest is compounded every quarter or annually, and paid at the time of maturity. In a Non-Cumulative FD, interest is paid out periodically, as per your choice. You can choose to be paid annually, monthly or during maturity.
Fixed Deposits have flexible tenures. Your fixed deposit schemes could range between 1 year to 5 years.
Rainy day funds
It is possible to secure a loan against fixed deposits. Thus, an FD can be your saviour in times of emergency.
Risk Management for safe players
If you do not want to be exposed to the market and its fluctuations, financial instruments such as mutual funds, gold etc may not be your cup of tea. This is where fixed deposits can help you manage and minimise the risks. Even if you have an investment portfolio, it helps you balance the risk.
Inculcates the habit of saving
Unlike the savings lying in your savings account, the funds in fixed deposits cannot be immediately withdrawn for impulsive needs.
Easy to Withdraw
It is possible to withdraw the amount in the fixed deposits. However, premature withdrawals come with a charge. Let’s explore this conundrum in greater detail.
Under ideal circumstances, you would like to keep your fixed deposits until their maturity date.
Keeping your fixed deposits secure until maturity helps you grow your savings, and gain from your fixed and steady interest rates.
However, unforeseen circumstances may push you to break your fixed deposit prematurely.
Premature closure comes with a penal provision
When you withdraw the fixed deposit before its maturity date, you pay charges for the premature withdrawal. Usually it in the form of lower interest rates being given on the calculation of the interest. Hence it is advised that you should do the calculations and be prepared to receive a lower return. If the loss is unreasonable, you can possibly find an alternative to breaking the fixed deposit. You can try to fund it through other modes of finance so as to keep the FD intact and the returns optimum.
What to do instead:
When an emergency strikes, instead of breaking the FDs prematurely, in an unplanned manner, you should explore the option of securing a loan against these fixed deposits if the situation allows. Breaking an FD costs you in the form of a sizable loss of interest – the very reason you had secured an FD in the first place.
Before you liquidate your fixed deposits, try to explore all other avenues. Once you have exhausted all options, make a note of the withdrawal terms, compute the penalty and be ready to receive a lower sum.
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