In India, fixed deposits are among one of the most trusted investment vehicles, thanks to their low-risk nature and the trust people have in banks. FDs are so popular that it will be hard to find an investor in India who hasn’t heard about them.
But the popularity fixed deposits have is hard-earned. FDs have a proven track record of giving their investors exactly what they have promised. They are feature-rich and have kept investors’ money safe, even during times of economic turmoil. But is that it? Definitely not! Let’s do a deep dive and explore all the benefits of fixed deposits in India.
- FDs are a safe haven for your hard-earned money
Nobody needs to teach an investor the value of money. Most individuals earn their money through hard work and keeping that money safe is of utmost importance. This is where a FD can help you. They are not market linked and hence, the stock market and economic conditions have no role in your deposit. Instead, the bank gives you a fixed interest for the money you have invested. This makes the risk associated with investing in a fixed deposit close to zero. Only extreme situations like the closure of a bank would affect your deposit and such situations are rare.
- FDs make financial planning easy
With market-linked investments, the return you expect is merely an expectation. It could go higher or lower based on the stock market movements. However, with fixed deposits, you know exactly how much you will earn, and a return is guaranteed. You can make the best use of this for your financial planning. The financial calculation is even easier these days as the internet can provide you with ample resources for your fixed deposit calculation.
- FDs work on their own
Once you start an FD, you need not worry about it at all throughout its tenure. There’s nothing to monitor here as the interest rates are fixed.
- You can break it if you want
A myth that clouds the air regarding fixed deposits is about their lock-in period. While it’s true that you need to stay invested until the maturity date to fully benefit from your fixed deposit investment, you can always break it in times of need with a small charge. Your money is never quite locked-in unless you opt for the tax-saving fixed deposit option that has a five-year lock-in period. You can also use your FD as collateral for loans and even take an FD credit card when you are in need of money.
- FDs pay you regularly
With FDs, income payments as interest are guaranteed. This works extremely well for people who have a lump sum to invest and are looking for ways to get a regular income out of that. But what if you don’t have a lump sum? There is a way for that too! Recurring deposits are like a Systematic Investment Plan (SIP) of FDs. You can invest smaller amounts in your recurring deposit account every month to slowly build your corpus. Compounding helps your RD big time as well.
The bottom line
Fixed deposits are simple and opening a fixed deposit is even simpler. Most banks will allow you to open an account online in a matter of minutes! Consult your financial advisor and open your FD account today.