1. Safe investment
Various assets have various functions in the investment portfolio. A Fixed Deposit is thought to be a particularly safe decision because it offers guaranteed returns and stability to the investment, whereas equity investments such as stocks, mutual funds, and shares may be impacted by market volatility. In contrast to other investments, investors can just invest a small amount of money while still being guaranteed a return.
A fixed deposit makes it simple to withdraw money in times of need, even before the term has ended. Although the investor would have to pay a modest penalty, it is quite simple to withdraw money early. But this facility unquestionably makes it easier for investors to obtain emergency cash.
3. Flexible Tenures
The minimum term for a fixed deposit is six months, while the maximum term is ten years. This time frame guarantees that an investor receives the most returns on their investment over a set time frame. You may therefore determine the exact amount that can be received after the fixed tenure by searching up the tenure and rate of interest to be earned on a Fixed Deposit.
4. Short-term goals
If you’re looking to reach your short-term objectives, a fixed deposit is thought to be the greatest investment choice. You might wish to accomplish a short-term goal within one to three years after your investment. The primary goal of these goals is to protect the principal sum while also generating some interest. For instance, short-term goals can include buying a piece of technological equipment for your home in a year or planning a family vacation that you want to take in the next couple of years. These short-term objectives can be accomplished by investing in a fixed deposit because you can do so according to your budget and know the expected returns at the time of investment.
5. Loan against FD
The majority of banks provide a credit facility in the form of a loan or overdraft to customers who have fixed deposit accounts. If you need money right away, you can use this facility to borrow money at a reasonable interest rate without having to prematurely close your fixed deposit. An investor may borrow up to 90% of the amount of their fixed deposit when necessary.
6. Interest Payout Options
You can select the frequency of interest payouts with an FD as well. Depending on what best meets your needs, you can opt to receive interest on a quarterly, monthly, or annual basis. Investor may manage their finances over the entire term of the FD because they have an estimate of the size of the returns they will get upon maturity.
It is abundantly evident from the benefits and grounds for investing that a fixed deposit is a very profitable and advantageous choice to stabilize and expand your investment portfolio. Fixed Deposits are a popular investment option in India because of their low-risk profile and guarantee of high returns. Each financial institution sets its own interest rates based on the tenor, which normally varies from 4 to 8 percent. The lowest amount of parked deposits is often Rs. 1,000, while the highest amount varies depending on the institution. However, investing in fixed deposits is a great disadvantage, particularly if you fall under the highest income tax bracket, as the interest is added to your taxable income and taxed at your income tax slab rate.