Why Investing in Fixed Deposits Can be a Great Option for You?

A fixed deposit is a low risk financial instrument that can be tailored according to your financial goals. They are not market linked and, therefore, unaffected by market fluctuations and guarantee a fixed amount at maturity. In fact, your savings grow at a steady pace which has the potential to beat inflation. The FD interest rates depend on the payout frequency and tenure.

So, if you wish to invest in fixed deposits, here’s why it could prove beneficial.

Easy Cash Withdrawal

Due to liabilities, you might need to withdraw cash at any time. Unlike other investments, FDs can be cashed out on the spot with valid documents. You might have to pay a small amount for premature withdrawal, but that is all. This serves as a great cushion, particularly in times of emergencies like business loss or sudden medical treatment. This is, however, not recommended if you wish to earn the best fixed deposit rates.

Competitive Interest Rates

To help combat the annual inflation rate, you can find out more about FD interest rates. The best fixed deposit rates can be a steady source of income over a fixed tenure. You have the option of choosing whether to receive the amount yearly, quarterly or monthly. Else, you can remain invested, so that the interest amount is added to the principle, which keeps on growing. In fact, with the power of compounding, the smallest sums of money can turn into meaningful amounts and secure your financial future.

Flexible Payout

The amount accumulated through FD interest rates can be received monthly, quarterly, half yearly or annually. This is dependent on your requirements and is called the non-cumulative option. But, it’s a good idea to choose the cumulative option in which the amount is paid only at maturity. This is most suited for generating the maximum returns. In fact, through the power of compounding, interest keeps getting added to the principle, so that you earn interest even on the interest earned. Use an FD interest rate calculator to determine the amount you can expect.

During an agreed fixed deposit period, one can avoid the temptation of withdrawing funds. This is because you are required to keep an amount for it to grow over time. Unlike savings accounts, you cannot cash out whenever you wish to. Also, in case you break the fixed deposit before time, a certain penalty needs to be paid. This is another reason why investors refrain from withdrawals. Fixed deposits are particularly useful for millennials, since saving is often a challenging task for them.

Most people choose fixed deposits due to the guaranteed returns. This is often considered as a high return investment since the tenure and the interest rates are fixed even before you invest in it. The fixed deposit maturity amount is not market driven so the corpus you set aside makes sure your capital is risk free. In fact, your return is tax exempted up to ₹ 10,000 in one year. Talking about returns, some banks allow senior citizens an extra 0.5% on their FD investments.

Fixed deposits are also great tax saving instruments with low volatility and high returns. To know what is a fixed deposit account and how to open one, check online today.