Investing your hard-earned money to maximize your returns is risky. This is when we look for investments that assume lower risk while offering considerable returns. New investors or retired personnel are those who look for such forms of investment options. A fixed deposit (FD) is one such investment avenue that provides competitive and constant returns with the lowest risk. A fixed deposit scheme ranks among the safest investment options regarded by all financial experts.
A fixed deposit offers guaranteed and definite amounts of return to its investor. No wonder the risk-averse people feel security while investing their surplus funds in such fixed deposit schemes. It is an excellent way to have a large corpus at the time of retirement with systematic and period investment in fixed deposit schemes.
These are the benefits of investing in fixed deposit schemes-
Flexibility of Tenure
There is a large amount of flexibility offered in terms of duration when investing in a fixed deposit scheme. The minimum duration for an FD is seven days which goes up to ten years. Investment in FD is simple as you need not have an account with the bank for opening a fixed deposit. Not only banks but non-banking financial corporations (NBFC) and other organisations too accept FDs.
Fixed deposits are one such investment that has a fixed maturity amount which is known at the time of initial investment. FD interest rates are such that they offer guaranteed returns in the range of 6% to 9%. Premature withdrawal of your fixed deposit should be avoided as it will have a penal effect.
There is very little volatility when it comes to investment in fixed deposits. Unlike stocks, mutual funds or other debt funds, fixed deposits are not influenced by market fluctuations.
Any change in the FD interest rates affects your investment at its renewal only.
Compounding of Money
Compounding is a highly ignored concept when we deal with investments. Albert Einstein rightly quoted, “Compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t, pays it”. Most investors search for higher investments that offer higher absolute returns and not compounded returns. Your FDs are generally compounded quarterly or half-yearly. This contributed to the investment earning interest on the previously earned interest component too. So longer the period for which you stay invested, more significant is the corpus you have at the time of maturity.
Fixed deposits are not only offered by banks but also non-banking financial companies or as popularly known as NBFC’s. There is a significant difference in the rate of interest provided by an NBFC as compared to a banking company. It is a myth that FDs in NBFC is riskier but that is not entirely true. An ‘FAAA’ rating to your fixed deposit scheme can ensure the protection of your capital with the guaranteed growth of an FD. Mahindra Finance FDs have an ‘FAAA’ rating by CRISIL, a leading credit rating agency in the country. Secure your investment in FDs, which have a higher safety rating!