Fixed Deposits have been the ideal investment choice for conservative investors for decades. It is investment avenues that can help one create substantial wealth without the risk factor included in it. Additionally, the best Fixed Deposit plans might also provide regular income for individuals, helping them meet their day-to-day financial objectives.
While all investments are tailored according to the needs of individuals, there are a few financial instruments that form an essential part of your portfolio. An FD is one such investment.
Mentioned below are a few reasons for you to invest in FDs:
- Less risky
Thoughtful and conscious allocation in assets is the key to long-term wealth creation. Different investment routes play different roles in your portfolio. For example, investing in the equity market via mutual funds allows your money to grow over time. On the other hand, investing in an FD provides you with added financial security and assurance of guaranteed returns. When you have a well-diversified investment portfolio across different asset classes, you can expect low volatility in your returns and enjoy a stress-free investing experience.
- Higher security rating
Aside from the low risk of an FD, fund safety can also be evaluated using ratings furnished by companies such as CRISIL. The FAAA (F Triple-A) security rating is the highest for this financial instrument. This indicates that interest and principal payments are very strong when it comes to the best Fixed Deposit plans. Thus, looking for FD plans with CRISIL ratings of ‘FAAA’ is an ideal way to balance your funds without risking returns.
- Assured returns
A fixed deposit is an investment tool that guarantees fixed return at maturity. The predetermined bank FD interest rate remains unchanged even during market fluctuations. As a result, fixed deposits are ideal if you have a financial goal that is essential and when you require a specific corpus within a specific time frame. You can use an online FD calculator to assess the return you can make depending on the principal amount, rate of interest and tenor. You can alter the inputs to determine an amount that would help you meet all basic financial obligations.
- Power of compounding
With the power of compounding, one can begin early and multiply wealth. Compounding allows a small amount to grow substantially over time. This happens as the compounded interest gets added to the principal tenor with each passing term. Thus, you earn interest upon interest. PNB Cumulative fixed deposits are ideal for those who do not require regular interest payments because the interest is paid in addition to the principal at maturity.
However, note that some FDs also come with simple interest returns calculation. Thus, it is essential to compare different plans before obtaining one. In this regard, consider conducting thorough research through Bajaj MARKETS, which is a diversified marketplace housing several best Fixed Deposit plans offered by leading banks and financial institutions.
- Ideal to meet short-term financial needs
When investing for a short term, it is critical that your capital investment amount remains risk-free while you earn a reasonable return. In this regard, Fixed deposits are appropriate for goals that must be met within a short time frame. For example, you may want to purchase an expensive present for yourself or plan a lavish vacation. Fixed deposits are a good option for such goals because you already know the approximate cost of the trip or gift and can make the investment based on the rate of interest offered by the banks.
- Tax saving instrument
Section 80C of Income Tax Act allows you to claim an income tax deduction for investing in the tax saving Fixed Deposit plans. You can claim deductions of up to Rs.1.5 Lakh per financial year by investing in a tax saving FD. However, note that these investments have a lock-in period of five years.
In addition, note the deduction under Section 80C of Income Tax Act is applicable to various other investments. Thus, if you have already exhausted the Rs.1.5 Lakh limit through other interest income, then you won’t be able to claim a deduction on your FD interest income.
- Helps avail loans
One of the least acknowledged benefits of FDs is their ability to provide access to loans in times of financial emergencies. Several banks offer loans on Fixed Deposits up to a certain amount. You can opt for this facility and meet your urgent financial requirements with ease.
While FDs feature significant ease of access, choosing the best Fixed Deposit plans can take time, considering the different types of plans available in the market. Thus, ensure to stay updated and conduct thorough market research by comparing different plans before making a decision.
