Why Fixed Deposits Make For Sensible Investment Instruments?
New investment entrants have slowly made their way into the Indian market. These include options such as equities, mutual funds and real estate, which have become popular with the younger generation due to the higher appreciation of capital.
Despite this, fixed deposits still hold sway over investors, especially those who seek capital preservation. Here’s why you should consider a fixed deposit investment as a useful and sensible investment option.
- You Get Assured Returns:
Fixed deposits are financial instruments that give you an assured interest on your principal amount, which is locked in for a fixed duration. Your interest earnings are not dependent on market fluctuations, and this makes FDs an investment you can count on.
The interest rates on FDs are higher than those of savings accounts because your funds are invested for a fixed tenor. The high returns thus compensate for the lack of liquidity.
- You can choose your pay-out frequency:
FDs allow you to compound your earnings or access them periodically. When you choose a cumulative fixed deposit, your interest is calculated annually, and is added to your principal and reinvested for the next year.
You get these earnings at maturity. For example, if you have invested Rs.1,00,000 for 2 years at a rate of 7.80%, you will earn an interest of Rs.16,208.
Conversely, you can choose to get your payout at regular intervals to manage your lifestyle expenses via non-cumulative deposits. For example, say you have invested Rs.1,00,000 for 2 years at a rate of 7.53% and have chosen to receive monthly earnings. You will get Rs.627.50 every month and a total payout of Rs.15,060.
- You Can Cope With Emergencies:
Sometimes, due to a contingency, you may need cash urgently. At such times, you can make a premature withdrawal of your FD and pay a small penalty. Further, if the need arises and you face a liability crunch, you can even take a loan against your fixed deposit. Financial companies offer you between 75% to 60% of your total FD investment as a loan both quickly and easily. So, you can tackle your emergencies conveniently.
- You can multiply your savings:
Putting your money in a fixed deposit is not just a sensible thing to do because you get guaranteed returns. It is a practical and useful option because it inculcates financial discipline. Since an FD locks in your funds for a fixed duration, and tells you exactly what you stand to gain at maturity, you can develop your saving habit more easily.
This also helps young investors learn that before you start spending your money, you must first save it. This is beautifully echoed in the words of the investing guru Warren Buffet who said, “Don’t save what is left after spending. Spend what is left after saving.” Investing in fixed deposits helps you to learn and imbibe this valuable lesson.
- YOU CAN SAVE TAX:
Your FD allows you to get tax benefits for interest earnings up to Rs.5000 or Rs.10,000 depending on the type of deposit you choose. After that limit, you will be charged 10% interest depending on your tax slab. Senior citizens, however, can get their entire FD earnings exempted if their total annual income is less than the minimum income exempted.
Now that you know why FDs are one of the most popular investment tools, invest in a high-earning FD today. Choose the Bajaj Finance Fixed Deposit, which not only offers high returns on your investment, but also promises stability and security with high safety ratings. With deposits starting at as low at Rs.25,000, start now to reap the benefits!