Financial planning is an important activity that you should develop and maintain once you start earning.
Thus, one of the first steps of financial planning includes developing a habit of saving and investing your wealth prudently so that you can plan a luxurious future.
Out of several investment opportunities, fixed deposits have become the most popular and favourite amongst individuals.
Top 5 reasons why Fixed Deposits are the best form of investments
What is a fixed deposit?
A fixed deposit is an efficient tool of investment where you invest your funds for a specific tenure and earn interest.
Under this scheme, you must invest a certain amount of your corpus and receive the returns at the end of the tenure. The rate of interest provided might, however, vary based on the policy.
If you are planning to start such a scheme, you must be aware of the FD rates in India. Thus, fixed deposit accounts help you to accurately estimate the amount by which your wealth would expand at the end of your tenure.
However, before committing to such a scheme, you should first ensure that you know what a fixed account is and its various terms and conditions.
There are several reasons why fixed deposits are one of the most preferred forms of investment; they are as follows:
There are plenty of options when it comes to investing your wealth. For instance, you can invest in different stocks. However, due to market fluctuations and other external factors, the returns you receive on your investment in such cases are not constant.
So, while on the one hand, you can gain enormous returns, there might be chances of incurring losses as well. Contrary to this, fixed deposits ensure an assured rate of return.
This is because once you invest in a FD, then the fixed deposit interest rate is fixed for a specific tenure, guaranteeing you will receive the same irrespective of the prevailing market conditions.
Apart from providing a fixed rate of return, fixed deposit accounts can also be used by individuals for undertaking a loan.
Though this depends on the amount invested and the kind of policy you signed up for, the loan sanction can generally be up to 70% of your total fixed deposit amount.
Fixed deposits are known to be one of the most secured forms of investment. For example, suppose you invest most of your wealth in a company’s stocks, and the company shuts down due to its internal failure.
What happens to your investment? Of course, this is not the scenario you would want to find yourself in.
However, fixed deposits are independent of market volatility and thus can ensure guaranteed returns. This safety net is how it helps you to avoid adverse situations where you might lose all your hard-earned money!
Cumulative and non-cumulative terms
You can also choose the type and interval of receiving the returns. For instance, you can either choose a monthly or quarterly scheme to receive the returns or gains regularly.
Alternatively, you can choose to accept all the returns at the end of the tenure, providing a more significant corpus at one go.
The safety and security that Fixed Deposits offer make it an apt asset to have in your portfolio of investments for risk-adjusted returns.