Why Fixed Deposit Is A Smart Way Of Investment

When it comes to investing your hard-earned money, safety and assured returns are key priorities. This is where fixed deposits (FDs) shine as a smart investment option. FDs offer a secure and reliable way to grow your savings, making them an integral part of a well-balanced investment portfolio. In this article, we’ll explore the benefits of investing in fixed deposits and how they can help you achieve your financial goals.

Understanding Fixed Deposits

What Makes FDs Unique?

Fixed deposits are a type of investment where you deposit a lump sum for a predetermined period, ranging from a few days to several years. During this tenure, your money earns a fixed interest rate, which is higher than what you would typically get from a savings account. This makes FDs an attractive option for those looking to earn better returns without exposing their money to market volatility.

Breaking Down FD Interest Rates

The interest rates offered on fixed deposits vary depending on the bank or financial institution and the tenure of the deposit. Generally, longer tenures fetch higher interest rates. For instance, Airtel Finance offers competitive FD interest rates ranging from 3.00% to 7.50% per annum, depending on the deposit amount and tenure.

How to Calculate Your FD Returns

To calculate the returns on your fixed deposit, you can use an online FD calculator. Simply enter the deposit amount, interest rate, and tenure, and the calculator will show you the maturity amount and the interest earned. For example, if you invest ₹1 lakh in an FD with a 7% interest rate for 3 years, your maturity amount would be approximately ₹1,22,504, with an interest earned of ₹22,504.

Benefits of Investing in Fixed Deposits

Safety and Security

One of the primary reasons why fixed deposits are considered a smart investment is their safety. FDs are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to ₹5 lakh per depositor per bank. This means that even if the bank faces financial difficulties, your money is protected up to the insured amount, providing you with peace of mind.

Guaranteed Returns

Unlike market-linked investments such as stocks or mutual funds, fixed deposits offer guaranteed returns. The interest rate is fixed at the time of opening the FD, ensuring that you know exactly how much you will earn at maturity. This predictability makes FDs an ideal choice for risk-averse investors or those with specific financial goals.

Flexibility and Liquidity

Fixed deposits offer flexibility in terms of tenure, ranging from a few days to several years. This allows you to choose a tenure that aligns with your financial goals, whether it’s saving for a short-term expense or planning for long-term wealth creation. Additionally, most banks allow premature withdrawal of FDs, albeit with a penalty, providing liquidity in case of emergencies.

Loan Against FD

Another benefit of investing in fixed deposits is the option to avail a loan against your FD. Banks typically offer loans up to 90% of the FD amount, with the deposit serving as collateral. This can be a convenient source of funds in case of unexpected expenses or financial emergencies, without having to liquidate your FD prematurely.

Tax Benefits

Fixed deposits also offer tax benefits under Section 80C of the Income Tax Act. Investments in tax-saving FDs, with a lock-in period of 5 years, are eligible for a deduction of up to ₹1.5 lakh from your taxable income. This can help you save on taxes while earning assured returns on your investment.

Choosing the Right Fixed Deposit

Factors to Consider

When choosing a fixed deposit, consider factors such as the interest rate, tenure, minimum deposit amount, and premature withdrawal provisions. Compare offers from different banks and financial institutions to find the best deal that suits your investment goals and risk appetite.

Documents Required for FD Opening

To open a fixed deposit, you typically need to provide the following documents:

• Identity proof (PAN card, Aadhaar card, passport, etc.)

• Address proof (utility bill, rental agreement, etc.)

• Recent photograph

• Duly filled application form

Some banks also offer the convenience of opening an FD online, making the process even simpler and faster.

Conclusion:

Fixed deposits are indeed a smart way to invest your money, offering a perfect blend of safety, assured returns, and flexibility. By understanding the benefits of FDs and choosing the right option based on your financial goals, you can make your money work harder for you. Whether you’re a conservative investor or looking to diversify your portfolio, fixed deposits deserve a place in your investment strategy.

So, if you’re looking for a secure and rewarding investment option, consider opening a fixed deposit with Airtel Finance today. With competitive interest rates, easy online application process, and the trust of a reliable brand, Airtel Finance can help you grow your savings and achieve your financial dreams.

FAQs:

1. Why fixed deposit is better than savings account?
   Fixed deposits offer higher interest rates compared to savings accounts, allowing your money to grow faster. FDs also provide guaranteed returns and better safety for your principal amount.

    

2. What is good about fixed deposit?
   Fixed deposits are a low-risk investment option that offers assured returns, flexibility in tenure, and the ability to avail loans against the deposit. They are also insured by DICGC, providing added security.

    

3. Is there any benefit in fixed deposit?
   Yes, fixed deposits offer several benefits such as guaranteed returns, safety of principal, flexibility in tenure, loan against FD facility, and tax benefits under Section 80C for tax-saving FDs.

    

4. How to do FD smartly?
   To invest in FDs smartly, compare interest rates from different banks, choose a tenure that aligns with your financial goals, consider tax implications, and diversify your investments across multiple FDs with varying maturities.