Putting money aside for rainy days has become more critical due to the COVID-19 pandemic. However, even though saving money is essential to construct a financially secure future, relying solely on one’s savings does not make sense. If you have already been successful in putting money aside for savings, you should give careful thought to how you might make your money increase over time.
Mutual funds, fixed deposits, the Public Provident Fund, and Direct Equity are among the most well-known types of investment available to people today, among other possibilities. Still, fixed deposits are arguably the most trusted financial product due to the best FD rates offered by several banks in India.
The top five compelling reasons to include fixed deposits in your investment portfolio are listed below.
Instead of investing in the unpredictable stock market, a fixed deposit comes with guaranteed returns. When you make a financial investment in the form of a fixed deposit, you are informed of the total sum you will get when the investment reaches its maturity. The fixed deposit returns will be calculated based on the FD rates agreed upon before the deposit was made, regardless of how FD rates change or how the economy performs.
Reduced Risk to the Portfolio
Your investment portfolio comprises various assets, including gold, stocks, fixed deposits, and equity, each of which serves a distinct purpose. Therefore, an instrument such as mutual funds allows your money to increase in value. In contrast, a fixed deposit, which offers guaranteed returns, provides stability to your portfolio.
Quick and Simple Acquiring of Loans and Credit
A fixed deposit can come in useful amid unforeseen financial problems. Getting a loan secured by your fixed deposit would not be difficult when you need finances. The amount that can be sanctioned is typically between 70 and 95 percent of the total value of your cumulative fixed deposits; however, this percentage can differ from bank to bank.
Offer Sweep in and nomination facility
A nomination facility is available with fixed deposits. You can provide the nomination at the beginning of the process when opening the FD account. On the other hand, as the account owner, you have the authority to change the nomination whenever it suits your needs and at any time. In addition to that, you make use of the sweep-in facility. You won’t have to worry about having inadequate funds in your account for a transaction or dealing with the embarrassment of a check that bounces if you have a sweep-in capability at your disposal.
Unpredictable hardships are always around the corner. Since you can access the cash earlier than the maturity date, a fixed deposit can be a lifesaver in these situations. There is no fuss involved, and the process is relatively uncomplicated, notwithstanding the possibility that you will be required to pay a fee or penalty. In addition, with a fixed deposit, you can select non-cumulative or cumulative FD rates for your investment. If you choose the first option, you will receive payouts on a quarterly or monthly basis, allowing you to use the interest income to pay bills and EMIs. If you choose the second option, you will be required to keep your money locked up until the term of the investment expires. You will benefit from compound interest when you do it this way.
A fixed deposit can be a very beneficial addition to an existing portfolio of investments. It is also great for fulfilling short-term financial goals you wish to meet within a given timeframe, such as paying for a family wedding or a child’s schooling. This solution is ideal for you if you want to meet these goals within a specific timeframe. A fixed deposit with a Bank is your best bet if you are interested in including a fixed deposit with the best FD rates as part of your investment strategy.