An investment instrument, fixed deposits are an extremely popular option in India. As part of this scheme, a sum amount is deposited with a financial institution for a set period of time. In return for depositing the given amount, a rate of interest is paid. The returns you receive will depend on the amount and tenure that you pick. Conservative investors preferably use fixed deposits as it is a very safe option and can be opened conveniently by anybody.
If you are looking to make investments through fixed deposits, then there is no better time than now. However, you must be aware of certain factors before you go ahead. Read on to know tips from financial experts and their ways on making the best of this investment option.
Expert advice no 1 – It is essential to check the financial position of the institute before putting your money into a fixed deposit. The rate of interest varies from institution to another and may typically range between 6% to 10%. Choose a reputed institution that offers a good rate of interest.
It is best to break you available funds into several small amounted fixed deposits. This is a better way rather than putting the whole amount into one fixed deposit.
Expert advice no 2 – There is an evident decline in the rate of interest on fixed deposits and it is expected to go down further. For this reason, it is best to lock in your fixed deposits at the current rate for a long tenure. In the case that you do feel like you need financial liquidity in the near future, you may make smaller FD deposits. This way, you do not lose out on a big amount of interest return.
Expert advice no 3 – Fixed deposits make for a very viable option if you in the low tax bracket. It can help you make big savings through the rate of interest that you are offered. However, it may not be the best option for anyone who falls in the higher tax-bracket. This is because other kinds of investments such as mutual funds will bring you better interest returns.
Fixed deposits do more than just helping you earn through high returns. They require you to keep your amount locked-in for a given period. This aids in inculcating a habit of savings. Essentially, it also promotes better financial management.