5 Reasons Why Fixed Deposits Are a Great Investment Choice

As more and more Indians understand the importance of saving and investing, there is a growing need for investment options that are safe and As more and more Indians understand the importance of saving and investing, there is a growing need for investment options that are safe and offer high returns. As a result, the time-tested Fixed Deposit (FD) continues to be one of the most preferred options for investment. Check out this blog post to know 5 reasons that make FDs a great addition to your investment portfolio.

Investment options such as stocks or Mutual Funds are very popular for their potential for high returns. But not many investors are comfortable with the high level of risk that such investments carry. While Indian investors are now looking for different ways to save and invest, most people generally prefer safe investment options that offer decent returns. One of the best options that fit this requirement are Fixed Deposits. Let us have a look at some reasons that make FDs such a reliable option for investment.

1. Fixed Returns

The returns from most investment options that offer high returns are tied to market conditions. Accordingly, there is uncertainty about how good the returns would be.  Moreover, there can also be capital loss with such investments.

If you are looking for a safe investment, FDs are one of the best options as the returns are fixed and not market-driven. You know the returns that you will earn from your FD investment even before you invest any amount.

2. Deposit Insurance

Depositors get insurance cover for the amounts held in their FDs, Savings Accounts and Current Accounts with a bank up to ₹ 5 lakh. In other words, amounts up to ₹ 5 lakh per bank, per depositor are insured. This adds an additional layer of safety to your FD investments.

3. Ability to Close FD Before Maturity

Another reason that makes FDs a great option is the premature withdrawal facility. While you should try and remain invested in an FD up to the selected tenure, you do get an option to withdraw your funds partially or fully before the tenure ends, albeit by paying a penalty. Thus, you can be assured that your FD investment is liquid and can be withdrawn in case of an emergency.

4. Loan Against FD

If you have invested in an FD and need funds for some reason, you can use your FD to get a loan rather than break the FD. Many banks now allow you to borrow as much as 90% of your FD amount and accrued interest. So, apart from being a safe investment plan, your FD investment is multifunctional and can also be used for taking a loan.

5. Automatic Renewal

At the end of your FD tenure, you are not even required to open a new FD as banks now offer automatic renewal facility. Opt for this facility and your principal amount as well as the accrued interest will be re-invested at the prevalent rate of interest.

A wide range of investment tenures, minimum balance and nominee facility are some of the other benefits of investing in FD.

Types of Fixed Deposits (FDs) in India

There are various types of Fixed Deposits (FDs) and they cater to different financial needs. They are listed below:

1. Standard FD: This type allows you to invest a specific amount for a tenure ranging from 7 days to 10 years. It offers a higher interest rate than a Savings Account and ensures safety of your capital. Standard FDs are ideal for individuals seeking secure and attractive returns.

2. Tax-Saving FD: The Tax-Saving FD offers tax benefits under Section 80C of the Income Tax Act, allowing deductions up to ₹ 1.5 lakh. Remember that it has a mandatory five-year lock-in period, making it suitable for long-term savings.

3. Senior Citizen FD: This FD is specifically for senior citizens (aged 60 years and above). This type of FD offers additional interest to senior citizens so that their financial security is assured during their retirement.

How to Choose the Best FD Plan

Choosing the best FD investment plan requires careful analysis of your requirements. Read on to know more. 

1. Compare Interest Rates: Higher rates ensure better returns on your fixed return investment plan. 

2. Tenure Selection: Choose a period between 7 days to 10 years based on your financial goals. However, opting for a tenure of at least 15 months or more can help you maximise your interest earnings.

3. Senior Citizen Benefits: If you are a senior citizen, choose an FDs that offers the highest interest rate for senior citizens.

4. Liquidity Needs: Consider withdrawal flexibility, especially with non-cumulative FDs. 

5. Tax-Saving Option: For tax benefits, select a five-year Tax Saving FD. 

Choosing the ideal FD plan can help you maximise returns and eventually meet your future financial goals.your future financial goals.

Conclusion

Fixed Deposits have long been the go-to investment option in India due to all the different reasons listed above. If you are searching for safe investment options in India that offer fixed returns with almost zero risk, contact a reputed bank to open your FD today.

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