Investing is an important part of financial planning to meet any emergency and plan for long-term goals like retirement. Additionally, investing from an early age allows you to accumulate more wealth through compounding, making it easier to accomplish your financial goals.
About fixed deposits (FDs)
You may choose from a plethora of investment options, such as shares, mutual funds (MFs), bonds and securities, and deposits. However, most investments like MFs and shares have higher risks, which may not suit your risk profile.
Debt instruments, such as bonds and securities are less risky when compared to market-linked investments. However, if you are looking for secured returns, fixed deposits (FDs) are the best option.
Public and private banks, as well as non-banking financial companies (NBFCs) like Mahindra Finance, offer FDs. The deposits come with a specific duration between one to five years. Additionally, fixed deposit interest rates are pre-determined, ensuring guaranteed returns.
Benefits of FDs
- Higher returns for older investors
If you are planning to build a respectable corpus to lead a comfortable life post-retirement, you may opt for fixed income securities like Public Provident Fund (PPF) and Senior Citizens Savings Scheme (SCSS). However, the current interest rates for these are 7.1% and 7.4%, respectively. In comparison, FD interest ratesrange approximately from 7.35% to 7.59% for senior investors, allowing you to earn greater returns.
The Reserve Bank of India (RBI) insures FDs for an amount of up to INR 5 lakh issued by any bank. Therefore, you are assured of your investment in case of an unexpected turn of events.
- Credit rating
You can consider investing in FDs issued by NBFCs, which are highly rated by credit rating agencies. Such a rating is mandatory as per the guidelines for all NBFCs that issue FDs.
Investments like PPF and SCSS have a minimum lock-in period, which means your money is stuck during this time. Although FDs are issued for a particular period, you may withdraw these before the maturity date in case you need funds immediately. Alternatively, you may avail of a loan against the FD to meet emergency fund requirements.
Diversifying your portfolio is important to mitigate the risks associated with investments. In addition to safe returns, Fixed Deposit help you to accumulate wealth over the long-term.Check the FD rates offered by the lender. Use an online FD calculator to determine the estimated maturity value.