Successful financial planning entails a strategy where risk is minimal, but the return is not compromised. Now, compared to other investment options like mutual funds, where the risk is high, you need a financial product that balances out that risk and provides guaranteed returns.
This is where Fixed Deposits come into play, and it is one of the risk-averse investment instruments that bring the balance needed in the portfolio. Moreover, the minimum amount of FD being as low as Rs.1000, it becomes easier to invest in it.
Why are FDs essential?
- The interest rates are higher than normal savings accounts. So, it will return a higher amount of money than savings accounts. There are two ways to earn interest. One is a regular payment as per the depositor’s choice, and the other will be paid after maturity. Thus, medium and small investors prefer to invest in it.
- The interest rate remains unchanged from the booking of FD to maturity. It is non-variable, unlike other market-oriented investments, and ultimately it increases the capital amount.
- FDs are a highly secure and trustworthy option to store your money. If the bank fails to return the amount, there is a backup facility. DICGC (Deposit Insurance and Credit Guarantee Corporation) provides the reimbursement. The amount is Rs.5 Lakh.
- There is an option to break a premature FD in an emergency. You have to pay a small fine for this. But some banks don’t ask for any penalty.
- Also, the banks offer tax-saving FDs, which can decrease the customers’ income tax. It is a great way to increase your savings.
- Most financial organisations offer high-interest rates on FDs for senior citizens, which are higher than standard FD interest rates. Some banks also offer tax saver FD for senior citizens. So they can rely safely on regular earnings after retirement.
- FD is easy to understand because it has no affiliation with market-related parameters. You can open an online FD account through net banking or mobile banking and receive the return to your account after maturity.
Benefits from different types of FD
- Flexi sure Fixed Deposits: These FDs are linked to your savings or current account. Any deficiency in your account will be taken care of.
- Tax saving Fixed Deposits: There are two benefits of this FD. One is the attractive interest rates, and the other is an income tax exemption (under section 80C rule).
- Senior citizen Fixed Deposits: Senior citizens achieve additional interest from these FDs. The age group of 60 and above can avail this benefit.
- Regular Fixed Deposits: You can use a fixed amount of money from this FD.
- Recurring Deposits: These bring the facility to invest a small amount of money every month, and it will ensure a fixed income.
How to invest in an FD?
You can now invest in an FD easily online and offline. Here is a detailed overview of the process–
Online process
Step 1: Visit the official website or mobile application of the financial institution
Step 2: Find the option of Fixed Deposit, which can be under the personal banking section
Step 3: Select the FD type
Step 4: Fill out the online form with all the details
Step 5: Initiate the online fund transfer
Step 6: Receive confirmation of your FD investment
Offline process
In this case, you can visit the nearest branch of your preferred financial institution and fill out the physical form, submit all the details and deposit the amount to start your FD investments.
Conclusion
Fixed Deposits are one of the market’s most reliable financial products when looking for an easy investment opportunity. With an FD, the returns are guaranteed and secure, and the market fluctuations will not affect the outcome, which is one of its biggest advantages. Keeping an FD in an investment portfolio is essential when you are building an investment portfolio.
