Fixed Deposit

Fixed Deposits: Rediscovered!

in Business

Humans evolved from Home Erectus to the present day sophisticated and smart version. He continuously tries to grow, not just mentally and physically but also in various other ways. One of the present ways of growth is increasing capital or accumulating wealth. There is no denying the fact that most human workers grow their investments. They invest in numbers of instruments to let their amounts fetch leaps and bounds. One of the investment instruments is fixed deposits.

Fixed deposits are one of the oldest investment options and are widely popular. Almost everyone who is into investing knows the basics of FDs. However, the beauty of FDs is in the details. FDs are not just what catches the eyes; they are way more than that. Today we will rediscover the side of fixed deposit, which is often overlooked. If you traversed with us till the end of the article, you will definitely rediscover FDs in an altogether different way.

Some reservations about the fixed deposits (FDs)

  • Returns are lower than the other instruments.

The interest offered on FDs are lower than the few other instruments however, I believe that should not reduce the appeal of the FD as, unlike the other investment options, the FD offers assured interest on the amount invested irrespective of the market conditions. Thus, it can be a great asset in time of needs.

  • 2. Inflation is not adjusted.

One of the things most people complain about FDs is their inability to adjust for inflation. Inflation-adjusted returns are lower but it provides interest even when other investment with returns fails to give anything but negative returns.

Why FD?

  • Fixed rates of interest-earning make sure the amount is growing. Thus, it is a safe investment with guaranteed returns.
  • Tax saving FD is also helpful in saving tax income.
  • Individuals can invest in FD even when they are not well versed in economic conditions and financial markets.
  • It also helps one to take a loan against FD.
  • FD is especially helpful for senior citizens as most banks provide a higher rate of interest on fixed deposits for senior citizens.

How to optimize fixed deposits work for you?

Now that we have understood what the reservations are held against and pros of this investment option, let’s unlock the lock of how to bring out the best from these investment options.

1. Spreading the risk

The emphasis of spreading the risk cannot be emphasized much, as a wise man once said, “Do not keep all your eggs in one basket” the same thing applies for the FDs. Individuals must make sure that he is investing in different banks. This will help one to earn higher interest and also create a hedge against the possible fall in interest rate.

2. Investment in different tenors

Individuals must try to invest in different tenors of interest rates. This will allow him to gain from any change in the interest rates, which will further help in adjusting against inflation.

3. Choice between compound interest and simple interest

Individuals must make a reasonable choice while choosing between compound interest or simple interest. Compound interest brings with them greater profits; however, the flip side is they do not account for the change in inflation.

Investment in FD if done after reasonable research can bear fruit or may act as an ideal investment if done based on mere gut instincts and whims.

The current pandemic has taught us the true meaning related to savings. We overspend and are living life on faith. The current epidemic has forced all of us to introspect every area of our lives carefully. The more money we save, the more secure we are. Fixed deposit can act as a savior and best contingencies plan.

Well! Many people are playing it safe and try to avoid investing in risky ventures. FD comes first in the list as it is the most reliable and durable form of investment option.

Thereby, the most distinctive feature about fixed deposit is that:

Deposit Insurance: All the bank deposits, including FD, are covered under deposit insurance. There is a cover-up to Rs 5 Lakh, as per the Credit Guarantee Corporation.

Deposit insurance: The people can hold more than one fixed deposit, and the entire money will be insured.

No need to worry. Covid-19 has shifted the entire economy to an online medium. People can conduct their online transactions, check balances and make new investments with the help of DBS (DigiBank). Go Paperless! It is safe.

Moreover, a fixed deposit is something which offers a cover up to Rs5 Lakh, as per the Credit Guarantee Corporation.

A timely action taken at the right time can turn out to be very wise in unpleasant times. People with FD and still feel safe and make use of the money when they need it at the most. The withdrawal of FD before the maturity period is possible. The people can take out the money from the bank account and directly transfer it to the savings account.

Also, the people can hold more than one fixed deposit, and the entire money will be insured.

Well! Many people are playing it safe and try to avoid investing in risky ventures. FD comes first in the list as it is the most reliable and durable form of investment option.

Fixed deposit is also seen as a most sorted option for the senior citizens.