10 Tips to Get the Most Out of Your Fixed Deposit
There are two things that every motorcyclist yearns for: Power and mileage. Similarly, investors look for two things in their investments: liquidity and returns. Both these groups struggle to have their cake and eat it too. Investors have to compromise to get a fair amount of liquidity with inflation-beating returns. Here are a handful of tips that can show you how you can extract the most on your Fixed Deposit (FD) returns.
Appetite for risk:
How willing are you to drive your motorcycle at its maximum speed? How far you’re willing to go depends on your past experiences as a motorcyclist. It’s no different when you’re an investor. Your desire to take on uncertainties is subdued in proportion to the damages that have hit you. The losses you incur also dictate how your assessments are going to take shape. To increase you Fixed Deposit returns keep in mind that success and failures are good teachers. If you have made good returns on an FD with a low stability rating of an agency like CRISIL, you may want to invest in more such FDs; however, if safety is more important than the thrill of high returns, stick to investing in FDs with the highest safety rating.
The figures preceding the percentage signs boggle everyone. Are the interest rate on FDs dependent upon the economy? The returns you gain depends on the type of investment, which in turn is susceptible to a host of factors such as volatility, government regulations, etc. Equity, gold and real estate are the most affected by volatility. One of the many investment tips to pursue is that irrespective of the time horizon your fixed deposit returns should beat the prevalent rate of inflation. At interest rates ranging from 7.85% to 8.10% Bajaj Finserv’s FD returns counter any adverse effects you may face from changes in the consumer price index (CPI), which is an accepted standard of measuring inflation.
Keeping your money locked in means you compromise on liquidity. Fixed Deposit returns are higher than what you get in a savings account because of low liquidity. It is therefore not a prudent investment tip to abruptly liquidate your FD unless you have good reason to do so. There may of course be times when you do need the money to meet some expense but you do not want to liquidate your Fixed Deposit on a whim. Bajaj Finance helps you overcome this predicament by offering you a loan against your Fixed Deposit three months after starting one.
Besides inflation, taxation is also a key factor to consider. There are several investment tips on how you can reduce the tax pressure on your bottom line and ramp up the yields on your FDs. Knowing about TDS levied at 10% on a minimum interest earning of Rs.10,000 is another investment tips everyone with a Fixed Deposit must be aware of.
Do you want to stay invested for the long term or the short term? The standard norm is anything less to a year is considered short term and anything over an year and above is considered long term. But the long and short of an investment as far as the time factor goes is not always clearly visible on the horizon. Depending on what your objective is even five years could be considered a short period. In other words the investment horizon you opt for will be a function of your future requirement. As a proven investment tip, never forget what constitutes a reasonable investment horizon varies subjectively with no yardstick that suit all.
Remember we said that motorcyclists appetite for risk depends on their past experiences. Their willingness to take on a risk is also inversely proportional to their age. The same is the case with investors. You are most likely to accept more challenges concerning your money when you are much younger because you have age on your side. But not everyone’s age accords them this privilege and for those who have age on their side today, they won’t have it tomorrow. Safety is prime when you plot where you lie on the chronological scale.
Source of income:
Motorcyclists need fuel for their vehicles and investors need income to meet their goals and objective. The source of income should be not only being steady, but also regular. Unlike those who are self-employed, salaried individuals have a set timeline when it comes to income and pay dates. However, getting a salary every month is no indication of stability. So both self-employed and salaried investors should create multiple sources of income to tide over such eventualities.
More mouths to feed? Though the saying:
A small family is a happy family’ once adorned family planning billboards, it has wide implications in the investment world too. Having more mouths to feed means you have to add more income. When you have parents and children dependent on you, every rupee you invest occupies your attention making you less likely to undertake any financial adventures.
Financial education: In this day of information overload another investment tip is that it is not only important for you to know but also revise what you know. So keeping yourself updated and knowing why yesterday’s myth has become today’s fact will make loads of difference on how your fixed deposit returns fare.
Change is the only constant. Like everything else in life, the financial world you live in is also subject to flux. What holds true of your investment today does not hold good tomorrow. Do not be impressed by charts that show investment in a certain instrument consistently generated phenomenal returns for the last five years. Investment tip: Ask your agent as well as yourself whether this will really be the case in the next five years. Remember, no one can predict the future. The past can help you learn; it does not always help you earn.