Every investment must have a fair blend of safe, moderate and risky investments. While stocks and commodities can be considered as moderate to high risk investments, fixed deposits are safer investments. Needless to say, fixed deposits over a good amount of time have reigned the investment market as the most stable and safer mode of investment. This is the amount of money one deposits in a bank for a fixed period of time, and is also withdrawable after the time span is over.
This obviously does not mean that an investor loses his/her right to money in times of emergency. One can still withdraw the money but then a portion of an interest payable has to be waived off. Also, in certain cases, a penalty charge has to be paid in case of pre-mature withdrawal. Now, having taken into consideration all the pros and cons of investing in a fixed deposit, let us tell you what are the major benefits of investing in an FD, and why you should start investing in one today.
Assured return rates – Mutual funds are subjected to market fluctuations and risks, so it may happen that you invest a good amount of money in the stock market and end up getting lesser returns. This is because the rate of returns keeps varying. However, in case of a fixed deposit investment does not take away the guarantee of earning assured returns. FDs are not subjected to market risks.
Availing Loans against FDs – If you have a fixed deposit investment, you can get a loan against it in times of emergency. The rate of interest on the loan is usually 1-2% higher than the rates offered on the fixed deposits.
Save Taxes – If you are thinking of a tax-saving investment regime, you can start investing your money in a Tax Saver Fixed Deposit. This allows tax deduction under Section 80C of the Indian Income Tax Act, 1961. You can claim a maximum of Rs.1,50,000 by investing in a Tax Saver FD. However, a tax saver FD mandates you to invest your money for a lock-in period of five years, wherein pre-mature withdrawal in not allowed. But the good news is that, along with saving taxes you also earn assured returns.
Promotes Saving Habits – Since pre-mature withdrawal in case of a fixed deposit investment is penalized, you would not want to withdraw your money before maturity. So, this encourages your saving habits and keeps your money intact.
Easy withdrawal – In times of urgent financial crisis, you may want a lump sum amount of money. In these times, fixed deposits can be broken and withdrawn to cater to your financial emergencies. You shall be penalized for the same but then you always have a financial backing ready at hand.
Flexible investment – FDs can be created for a period ranging from one month to about 10 years. So, you have a lot of flexibility while investing in FDs.
Regular Income – Most FDs are compounded quarterly, so if you want you may also receive a regular income against your FDs.
The bottom line is to invest in a fixed deposit with a bank that offers you a good interest rate. Once you have made a choice, simply invest diligently and watch your money grow with time.