Published On: Wed, Mar 9th, 2016

5 reasons why investing in a Fixed Deposit will be one of your best decisions

There is no dearth of investment options today. Everything from bonds, equities, mutual funds, and deposits are intended to give you a good return. However, some investments like stocks, while offering high returns, are subject to market risks.

If you are a conservative investor who wants to minimise the risks and ensure guaranteed returns on your investments, fixed deposits are your obvious choice. There are a number of fixed deposit schemes that you can choose from. To enjoy tax benefits, you can choose to invest in 5-year tax saving deposits.
Outlined below are the benefits of investing in a fixed deposit.

Guaranteed and safe returns

5 reasons why investing in a Fixed Deposit will be one of your best decisions

Most investments are highly subjective to market prices. But unlike equities, where returns are linked to the interplay of market forces and fundamentals, you are sure of what you will earn out of your fixed deposit investment. This assurance of receiving guaranteed returns makes fixed deposits an enticing investment avenue.
Fixed deposits score high on safety compared to other financial instruments. Furthermore, your deposit of up to Rs.1 lakh with any bank is covered by deposit insurance.

Encourages savings

It is wise to save for troubled times A fixed deposit entails locking in an amount of money for a specified time period. So in addition to earning interest, you will also not be tempted to spend your money. The deposit comes handy when you have to plan for some future expenditure, like your child’s education or wedding.

Flexible nature of deposit

There is no restriction on the quantum and tenure of the fixed deposits that you can open. At any time, when you have surplus funds and you want to make the best of the fixed deposit rates, you can open an FD. It can be for any term ranging from 7 days to 10 years, allowing you the flexibility to open different deposits in tune with your needs.

Easy withdrawals

When you need cash, you can easily liquidate your FDs. All that you stand to lose in case you break an FD is a percentage of the interest you could have earned. Fixed deposit can also be used as collateral to take a loan in case you wish to save the additional interest but need the money urgently.

Reinvestment option

You have the option to withdraw the interest monthly or quarterly and meet your financial obligations. But otherwise, you can allow the interest to compound and be a part of your principal, thus earning more. That way you can reinvest the proceeds on maturity to another FD.

To sum it up, fixed deposits offer safe and guaranteed returns, promote savings, acts as a cushion during a cash squeeze, and offer steady income in the form of interest.

If you have surplus funds in your savings bank account, transfer the same to a fixed deposit account and enjoy the steady returns on your investment.

About the Author

- Paul Linus is an eminent online journalist who has been writing news, features and editorials on different websites from across the world for about a decade.