Why is FD a Smart Investment

Posted in Investment Tips By Sajhyadri Chattopadhyay -
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In the labyrinth of financial choices, Fixed Deposits (FDs) emerge as the steady partner, offering stability, security, and a reliable avenue for Indian investors. Think of FDs as the bedrock of your financial fortress, assuring a haven for savings and a pathway to consistent returns. But why do Indians over the years sing praises of this crafty investment tool? Read on to gain the wisdom behind why FDs are the smarter choice for those navigating the dynamic landscape of investments in India. 

Stability and Security

  • Safety Net for Savings: 

In a world of economic uncertainties, FDs stand as a bulwark, providing a secure sanctuary for your hard-earned savings. For instance, consider depositing ₹1 Lakh in a 5-year FD with an interest rate of 8.5%. At maturity, you receive ₹1,42,500, providing stability even in fluctuating markets. 

  • Guaranteed Returns: 

Fixed returns act as a financial lighthouse, offering investors a stable beacon in the unpredictable seas of market fluctuations. If you invest ₹50,000 in a 3-year FD with an 8% interest rate, you receive ₹62,000 at maturity. This predictability ensures a reliable income source for investors. 

Also Read: How Do Fixed Deposits Compare to Other Savings Options?

Consistent Income Stream

  • Regular Interest Payouts: 

For those seeking a reliable income flow, FDs deliver with regular interest payouts, creating a rhythm of financial stability. For example, with a ₹2 Lakhs investment in a 2-year FD at 7.5%, you receive ₹7,500 as interest every six months, providing a consistent source of income. 

  • Cumulative Options for Growth: 

With cumulative interest options, FDs transform into growth catalysts, allowing investors to reap compounded benefits and maximize returns. Investing ₹90,000 in a 2-year FD at 8.1% with compounded interest, you receive ₹1,04,580 at maturity, showcasing how FDs contribute to wealth accumulation. 

  • Flexible Tenure Options: 

Whether short-term goals or long-term plans, FDs adapt to your financial canvas, making them a versatile and personalized investment avenue. This agility allows investors to align FDs with short-term needs or long-term plans, making them a versatile choice. On online financial platforms like Bajaj Markets, you can choose from multiple partners who offer a wide range of tenures.

You might also like: How to Choose the Right Fixed Deposit Scheme

High Financial Efficiency

  • Tax Benefits: 

By unlocking the smart side of FDs, investors enjoy tax benefits, especially advantageous for seniors. As a tax-efficient investment, FDs become not just a financial sanctuary but a strategic choice to optimize returns and minimize tax liabilities. If a senior citizen invests ₹1 Lakh in a 5-year FD with a 8.5% interest rate, they can avail of tax deductions on the interest earned, under Section 80TTB of the Income Tax Act of 1961. This makes it a smart choice for optimizing returns and minimizing tax liabilities. 

  • Emergency Liquidity: 

FDs offer more than just stability; they provide a financial lifeline during emergencies. Easily liquidated, they become a reliable source of immediate funds when unexpected challenges arise. If you invest ₹75,000 in a 1-year FD at 7% and face an unforeseen situation, you can break the FD, ensuring quick access to funds. This liquidity feature is a testament to FDs being more than just a long-term investment.

  • Loan Against FDs: 

Breaking an FD isn't the only option when funds are needed. The smart investor's move lies in utilizing the option to take loans against FDs, maintaining the investment while addressing urgent financial requirements. For example, with a ₹2 Lakhs FD at 7.6%, you can take a loan of up to 90% of the FD value without breaking the investment. This maintains its growth while meeting immediate financial needs. 

  • Balancing Investment Portfolio: 

Imagine your investment portfolio as a harmonious symphony. FDs contribute the stabilizing notes, especially appealing to risk-averse investors. Their steady performance and assured returns provide a counterbalance, ensuring a well-rounded and resilient investment melody. Suppose you have ₹5 Lakhs invested in equities for high returns but seek stability. Allocating a portion to FDs, for instance, ₹2 Lakhs at 7%, ensures a balanced portfolio. 

Other Standout Features of FDs

  • Capital Preservation: 

FDs excel in preserving the invested capital, assuring investors that the principal amount remains intact. Consider a scenario where an investor places ₹2 Lakhs in an FD with an interest rate of 7.25%. At maturity, the investor not only earns interest but also retains the entire principal, showcasing FDs as a reliable choice for capital preservation. 

  • Predictable Returns: 

The predictability of FD returns adds to their allure. Consider this example: an investor deposits ₹1.5 Lakhs in a 4-year FD at 7.5%. Throughout the tenure, the investor can accurately anticipate the returns, providing a clear financial roadmap for the future. 

  • Ideal for Risk-Averse Investors: 

FDs cater to the risk-averse, prioritizing stability over high-risk ventures. For risk-averse investors, FDs act as a financial anchor. Explore how the predictable nature of FD returns aligns with the risk tolerance and long-term goals of such investors. Compare FD returns to stock market fluctuations. While stocks vary, a ₹1 Lakh FD at 7.5% offers stable growth with no market impact. 

 

In the realm of financial choices, FDs shine as a safe harbour as well as a strategic investment offering stability, growth, and adaptability to diverse needs. As you navigate the seas of investment, consider the wisdom behind choosing FDs—a choice that stands the test of time. Convinced enough? Book a Fixed Deposit on Bajaj Markets today and sail through any curveball life throws at you! See your savings make impressive growth over time as you earn up to 8.75% interest annually! 

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