In the life of every investor, a period of investment analysis comes every year. It is when he wants to look into the investments he made, the returns earned, and how he can diversify his investment portfolio. As an investor, you want to ensure you gain more and worry less about the risk related to various investment instruments. Undoubtedly, a stressful challenge you face while building an investment plan is to identify instruments where you can invest.
Indeed, your investment decisions must be aligned with your needs and goals. However, Fixed Deposit or FD is one of those few instruments that can become a part of every investment portfolio. It has stood the tests of time to work as one of the smartest choices for all investors.
Here are a few reasons that make FD investments a safe bet aligned to your future goals:
The first thought that comes to mind when you invest money is – ‘Will my money stay safe in this investment option?’
If you can’t afford to bear the risk of money loss with your investment decisions, you won’t prefer investing in high-risk instruments such as equities and mutual funds. However, investing in an FD is the safest option that you can choose to park your money with a reputable bank. The corpus you set aside in a fixed deposit will stay safe over the chosen tenure, and you will get an assured benefit afterwards. Plus, you can check the safety of this financial product in terms of CRISIL ratings, the highest being FAAA (F Triple-A).
If you are a beginner investor, having an FD in your portfolio will help you balance out the overall risk factor.
It Gives Assured Returns
Ask your peers or parents about investing in an FD, and the first thing you will hear about it is the related returns. Take the case of fixed Deposits in a bank with CRISIL rating of FAAA/Negative. You can get more than eight percent annual returns of the amount you invest.
Unlike other investment products whose returns are highly dependent on market volatility, an FD can give you fixed monetary benefits. Knowing that you will gain some extra income at the end of your FD’s tenure, you can plan your life goals with it. For instance, you can invest a specific amount in an FD with a monthly payout option to get returns in the form of a regular monthly income in your retirement life.
It Comes with the Flexibility to Choose Tenure
Next to the returns you get with an investment, you also want to know for how long you need to set the corpus aside. This is important for you as you may not be able to get the total invested money back whenever you need it.
Another significant benefit of investing in FD is that you enjoy the flexibility to choose its tenure, which varies from seven days to a few years. You can put your money in a short-term deposit for seven days and get it back on the eighth day with the earned returns. On the other hand, you can opt for cumulative fixed deposit for ten years wherein your money will keep on reinvesting every year. You will get you compounded interest at the end of your FD’s tenure.
It Can Give You Tax-Benefits
As an investor, you can claim tax deductions for the money you invest in tax saver fixed deposits as per Section 80C of the Income Tax Act. These FDs have a lock-in period of five years, and you can earn interest on your investments at the rate varying from 5.5% to 7.75%. Also, the interest you earn in this type of FDs is taxable.
You will get more returns by investing your money in an FD than keeping it in a bank’s savings account. If you have a lower risk appetite and assured returns on your investments, start investing in FDs.