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.
Laddering
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.
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