Let’s Know, 10 advantages of Fixed Deposit and Who should invest in it?

A Fixed Deposit is a money Investment Instrument and It is provided by the Banks, Post offices ( In India ), and NBFCs. It pays a higher return on Investment from the normal savings. Let’s know, The advantages of Fixed deposit.

In this article, We will see the advantages of Fixed Deposit and who should invest in it. It can play an important role in your life and encourage the habit of making Investment.

“Do not save what is left after spending, but spend what is left after saving.”
Warren Buffet advice and thoughts
Warren Buffett
Investor

Fixed Deposit is Designed for risk-averse investors, It allows you to earn interest on the deposited amount over a short and long period of time. The rate of interest usually from 7% p.a. to 8% p.a. This counted on the period you invest.

Let's Know, 10 advantages of Fixed Deposit ( FD ) to save money

What are the benefits or advantages of Fixed Deposit to save money

Here are the benefits of investing money in the Fixed Deposit. This will help you while investing. Let’s see what are the advantages of Fixed Deposit to save money.

Fixed Returns

The returns on investment are fixed in the FDs. The returns are mansion in the form. You can see that while filling the form. It can be around 7% to 8% per am, It depends on the period you invest and on Institute you selected. 

No risk on Investment

FDs are comes in risk-free investments. Unlike other investment tools, FDs are not market-driven. You get an assured sum of money at the end of the maturity period. That’s the reason, This is an attractive investment for risk-averse investors.

Tax Benefits

Tax-saver FD attracts tax benefits under section 80C of the Income Tax Act, 1961. It falls under the Exempt-Tax-Exempt category. Although the interest earned on such FDs is taxable, you can claim a deduction of a maximum of Rs. 1,50,000 for the amount invested.

The FDs save from paying tax and In some countries, a small amount of tax is taken. But, Overall It saves our money.

Good returns

FDs provide better returns from the other savings investment.

For example, If you save your money in the savings bank account then you will get interested around 3.5%. and If you transfer that fund to a Fixed deposit then It would be around 8%.  

Let me know in the comment below, Which savings you choose.

Capital and returns are Insured

By saving your money in FD your capital will safe. For the safety of the capital and returns, you should check the company or institution is registered. 

FDs are comes in risk-free investments. Unlike other investment tools, FDs are not market-driven. So, the capital and returns are insured.

Flexibility in Deposit period

The FDs give better returns for the best period. You can choose your time period of investment. The period can be 6 months, 12 months, 15 months, 3 years, 5 years, and 10 years, It totally depends on you. 

Flexibility in withdrawal

We can withdraw our money anytime, But we withdraw FDs before mature then We have to pay a penalty.  The loss of interest becomes the penalty that you pay for a premature withdrawal. 

For example, An FD of Rs. 1,00,000 invested for 5 years at 8% interest rate, if withdrawn after a year, We will get interest at the rate applicable at that time, which will be lesser than 8%. The loss of interest becomes the penalty that you pay for a premature withdrawal.

Liquidity

FD is a liquidity asset for us, It can easily convert it into cash. FDs are liquid. Although the holder will be charged a penalty, FDs can be withdrawn when needed. Thus, you always have a certain sum of money in the bank.

Helps in Liability crunch

Sometimes liabilities arise thanks to uncertainty and you’ll have urgency of getting cash at that time in time. In those conditions, you’ll take a loan against your fixed deposits. there’s no such rule of percentage offering by banks.

However, banks mostly give loans starting from 60% to 90% of the deposits. Banks can even provide a higher amount, on the other hand, the interests charged are higher in those cases.

No negative overflow

The Invested money in the Fixed deposit cannot be Less than the Invested money. While Some people think The Fixed Deposit is withdrawal before mature then the penalty will be taken from the amount we have invested in it. You can understand by reading the below example.

For example, An FD of Rs. 1,00,000 invested for 5 years at 8% interest rate, if withdrawn after a year, We will get interest at the rate applicable at that time, which will be lesser than 8%. The loss of interest becomes the penalty that you pay for a premature withdrawal.

These are some of the Advantages of a Fixed Deposit.  If you are saving our money in a saving accounts transfer it to the Fixed deposit. 

Let's Know, Who should Invest money in FDs?

Saving and Investing is an important part of Life

A fixed deposit is one of the oldest and safest investment methods provided by the Banks,  Post offices ( in India ), and NBFCs. The interest paid by the FDs is higher than the normal Saving account or Current account. An FD can create regular income for you if the amount is big. 

The variable income instruments like Equity shares, Mutual Funds, and Derivatives instruments can provide higher returns but there are higher risks related to it. The risk tolerance level of investor guides investment decisions. For higher returns, there’s always a better risk element, which may also mean losing an enormous chunk of cash at some point in your time in adverse market situations.

An ideal investment portfolio may be a mixture of risky and risk-free investments as per the danger tolerance capacity and risk averseness of a private. Wealth management experts at Yes Bank assist you to make the proper decisions in reference to your investment needs after assessment of your investment goals and risk tolerance levels.

The people who want to earn a regular income and Who want to earn a fixed interest rate. These types of people usually invest in FDs. 

If you are saving your money in a savings account, then make an FD of that amount. This can bet inflation and earn more interest from the Savings account. 

I hope you have understood, What I want to tell you. My advice and though are given in this article. If you have any recommendations or feedback then you can write it down in the comment box below.

Spread the love

Chetan Choudhary

My self Chetan Choudhary from India. I like to invest money and grow it. I follow the thoughts of Warren Buffet and Dr. A.P.J Abdul kalam. Warren Buffet says "Do not save what is left after spending, but spend what is left after saving.” and Dr. A.P.J Abdul Kalam said " Dream big, You will get Big". These two sentences make me encourage to do investment. I say "we will be smart investors and We can be smart Investors". My purpose is to aware the people about the Investment. Because Investment plays an important role in our Life.

Leave a Reply

Your email address will not be published. Required fields are marked *