Fixed deposits [FDs] have always been lucrative investment instruments offering reasonable interest rates and good security. However, the Reserve Bank of India (RBI) had lowered the repo rate to 4.00% on May 22, 2020.
This will result in lower returns from your FD. You should also note that interest rates may reduce further. So, here are five strategies that you can implement to maximize your returns from FDs.
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Limit risk exposure
When investing in an FD, you must opt for a trustworthy issuer. You can determine this by checking the provider’s safety rating, which indicates the chances of default. You should also check if their past performance has been good.
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Divide the FD investment
Even if you secure safe fixed deposit interest rates from different FDs, it is always wise to diversify the investment in terms of tenure. You can make one long-term FD investment and then start a few short-term FDs. This way, you will not have to prematurely withdraw the entire fund in case of an emergency.
The long-term FD can be used to meet a significantly large financial goal, like making a down payment for a new home. Short-term FDs are perfect for meeting a smaller target, like a holiday with the family.
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Choose a non-banking issuer
Choosing the right FD issuer is a very important aspect of investing your hard-earned money. A non-banking issuer can offer relatively higher returns than a bank, including value-added services like a higher return for employees, multiple FD types, nominations, and easy renewals.
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Assign a nominee
The fixed deposit eligibility criteria allows any adult to invest in a Fixed Deposit. It is quite easy to get an FD account; however, you should assign a nominee to ensure that the investment serves its purpose. Make sure that your loved ones receive the returns from the FD in case of your absence. Opening a joint FD account with the ‘Either or Survivor’ option can be a smart idea; it can allow the joint holder to manage the deposit if the primary holder passes away.
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Invest for older family members
FD interest rates depend on the age of the investor. You should note that senior citizens can avail of a higher rate. For example, Mahindra Finance offers 0.25% extra interest to people over the age of 60. So, you can enjoy this benefit if you invest in FDs for your parents or grandparents.
Before investing, you should compare FD interest rates from different issuers to find the most suitable option. Following these tips will certainly help you earn stable returns without facing huge risks.