People usually inclined to save their extra money, rather than making it their disposable income. On the other hand, some people tend to invest it. Investing this extra income is a good idea, rather than saving it. But for people who have never invested, this idea might seem a bit confusing. At the start, investing might appear intimidating as there are many options out there. However, you will only want to allocate your funds in a safe and benefiting place, and fixed deposit can do that for you.
Fixed deposit (FD) is a trusted and the most preferred investment avenue in India. If not savings then FD is the best place to park your funds. Usually, investments are risky involving chances of loss, although they give high returns. Looking up to this situation, FDs are safe and manage to offer good returns. The returns earned on the investment are, however, significantly higher than that of savings account. Now, many financial institutions are offering this avenue – Banks and Non-Banking Financial Companies (NBFCs) both. Being said so, the returns earned on an NBFC fixed deposit is high in comparison to banks. The NBFCs are likely to offer slightly more interest rate than banks.
Coming to the risk, fixed deposits are considered less risky compared to mutual funds and other investment options. One of the reasons for so is that the interest offered over it is fixed, and does not tend to fluctuate over the time. However, the investments depending on market conditions which at times can also incur your loss, if the market rates fall down. Thus, this makes FDs the best place for investment as no such risk is involved. Besides, the tenure is also quite flexible, as you are free to select from one to five years. However, the tenure you choose will affect your interest amount.
Why Fixed Deposits For You?
Now, if you are new to the investment market, it is obvious that you don’t want to indulge in a huge risk. Keeping aside the risk, you also are here to earn good rate of interest on FD and make a profit over your invested amount. However, there are some more reasons you should look upon if you are investing for the first time.
- Great Point to Start With: The fixed deposit has been on the market for quite a few decades now and has managed to gain the trust of people. Being so, there are no such worries to invest in, if you are new. However, the returns are fixed – being it a one-time investment. Besides, you are also free to choose the desired tenure option.
- Easy and High Returns: Instead of saturating your money in the savings account for years with low interest, it is better to invest it. And what good place than FD – safe and high returns.
- Easy to Understand: Now, fixed deposit is quite easy to understand, not involving that hard maths. Whereas other investments like shares and mutual funds are concerned, you have to constantly keep on calculating your returns since market fluctuates time to time. Also, the deposit option is not complex here, since it is a one-time investment and you have to park all your funds at a single time.
- Auto-renewal Facility: In case, if you want to reinvest, you can do so – by activating the auto-renewal facility. Wherein, your account will be renewed automatically, and you don’t have to carry the investment process again. Since you are new, you might forget to reinvest; so in this case, an auto-renewal can help. However, this will also help you earn a little high interest.
The fixed deposit account can be the perfect instrument if you are looking for a low-risk and high return investment. Also, this can help you earn some income while you get familiar with other investment options. However, once you are familiar with the investment market, after the FD maturity, you are free to reinvest in other investments.