Here’s how fixed deposits could be an ideal avenue for investors with a low risk appetite
Traditionally, for Indian investors, buying physical gold and investing in a fixed deposit have been the most preferred options for saving and wealth creation. Over the past few years, many new options have come up and become popular, but for many investors, fixed deposits have not lost their sheen. If you are an investor with an extremely low risk appetite and want to earn assured returns, fixed deposits might just be a better option for you.
How to make fixed deposits work for you?
- You can choose amongst the well-known public as well as private sector banks for opening your FD account. You can also compare the FD rates offered by different banks and make your decision accordingly
- You will have to decide the amount you want to invest and the period for which you want to invest it. The longer the tenure of your FD investment, the higher will be the return due to compounding
- You have two options to claim interest:
- You may choose to have your FD interest as regular income monthly, quarterly or yearly. In this case, you will get your principal amount back upon maturity.
- If you choose to invest for a longer tenure of 5 years, you can also avail tax benefits on the invested amount.
- If you do not want interest as regular payouts, then it is compounded. Here, the interest earned for a period is added to the principal amount of the FD.
Then, the interest for the next period is calculated on the total amount of principal plus the interest of the previous period, and so on. Upon maturity, the entire amount accumulated is credited to your account.
If you need regular income from an FD, you can choose periodic interest payment. However, if you do not need an income from the FDs, you can choose the reinvestment option, which will lead to larger returns due to compounding.
How to invest in FD?
- You have ample choices amongst the leading nationalised and private sector banks to open your fixed deposit account.
- Due to advances in technology, you can compare different tenures and interest rates online and open an FD account at the terms best suited to your requirements. There is no need to visit the bank branch physically.
- You can register yourself, submit your documents for KYC compliance and open an FD account online on various investment portals too. Many banks and advisory portals have an FD calculator or Maturity Value calculator to help you to make an informed decision.
Investing in a fixed deposit could help secure your future
If you are a novice investor, you can begin your investment journey by opting for a comparatively safer avenue like fixed deposits to fulfill your financial dreams. For experienced investors, irrespective of their risk appetite, a fixed deposit could be one of the steps towards a financially secured future. You can also seek expert advice from a financial advisor to choose investments as per your own financial goals and risk appetite.