Tuesday, May 14, 2019

Is Fixed Deposit A Good Investment?


Fixed Deposits have been the preferred choice of investors for decades. It is one investment option that has stood the test of time. Unlike fixed deposits, market-linked investments have never been able to seek a wider acceptance from the mass market.

So why does Fixed Deposit check all the boxes?

Safety, stability, flexibility, laddering, high returns are some of the criteria which make fixed deposits work for the majority of the investors. From a newbie to an experienced investor, a percentage of fixed deposit investment is a given. The simplicity of the instrument lies in the fact that it allows the option of pay-out as well as growth for interest to be compounded.

Other options include annuities, post small savings schemes, mutual funds, debts, NCD, bonds and direct equities to add. However, the volatility in these instruments can easily hamper your principal amount. Also, the unpredictability of returns in many of these options ranks them behind the good old FD.

Features of Fixed Deposits

Interest rates

Fixed deposits are one of the top ways for banks to collect money to lend out. Hence, the FD interest rates are tuned once or twice in a year to achieve the best returns. If you are planning for financial goals which will arrive in 10 years and beyond, you should invest in multiple FDs to take advantage of changing interest rates. While banks offer a maximum of 7.75% return, company FDs always offer more. For example, Bajaj Finance FD is currently offering 8.75%.

Liquidity and immediate loan

Whether you are a young investor or a senior citizen, the prospect of breaking FDs is a painful one in when there is a requirement for immediate cash. You can go for a loan up to 75% of the maturity amount when you take a Bajaj Finance Fixed Deposit. Along with this, you can ensure flexibility with bank “sweep-in” feature in fixed deposits where you can earn a bit higher interest rate as compared to the normal savings bank account.

Flexibility to choose

FD can be opened from a tenor ranging from 7 days to 10 years in banks and in company deposits like Bajaj Finance FD- 12 to 60 months. You can mix and match tenors to maintain liquidity at the best possible interest rates. Bajaj Finance also offers options like a 15-month tenor fixed deposit with 0.25% ROI higher than a regular 12-month fixed deposit.


With FDs, you canuse the approach of laddering. This entails a specific amount dedicated to a fixed deposit (as little as Rs 25,000); with multiple fixed deposits lined up one after the other. This will help create a steady stream of returns over a period of time.

Cumulative and non-cumulative options: Using these options along with laddering, you can choose to eitherbuild a corpus with fixed deposits (with cumulative option). Here the interest will be reinvested as principal and will be redeemed on maturity. With the non-cumulative option you can seek periodic interval payouts to not only meet expenses but spend on things you want to do occasionally.

Company FD have always attracted investors because of their higher interest rates. The interest pay-out typically is quarterly, half yearly or annually. With companies like Bajaj Finance, you can look at interest rates up to 9.1% in the current interest rate scenario. Also, if you are a senior citizen, you can avail an additional 0.35% interest rate.

Author: verified_user