Fixed Deposits (FDs) are the most popular options for investments as far as a large section of Indian investors is concerned. The reasons behind this are well pronounced and include the safety of the investment, balancing out risks, decent returns, and overall compounding related advantages, if invested for longer durations. Hence, FDs are now chosen by most investors to add to their portfolios in India. They are offered by almost all leading Indian banking and financial institutions. The rates of interest usually vary from one financial institution to another.
Who Should Invest in FDs?
Fixed Deposits are ideal for investors who are looking for comparatively risk-free and safe investments in their portfolio. As a result, they are suitable if you wish to earn more interest and accumulate wealth for meeting future goals while sticking to rates of interest that do not fluctuate at all. At the same time, there are other types of FDs including 5-year tax-saver fixed deposits which come with tax benefits up to Rs. 1,50,000 under Section 80C. In most cases, experts recommend that you should stay invested in a fixed deposit (FD) for as much time as possible. 5-10 years is ideal for benefiting from the power of compounding. Furthermore, with the advent of technology, one can invest in FD online also nowadays.
Reasons Why You Should Include FD in your Portfolio
Here are some of the major reasons why you should have fixed deposits (FDs) in the investment portfolio:
- Risk-linked arbitrage– FDs (fixed deposits) are some of the safest and best investment options, particularly when they are compared with stocks or other market-related instruments. With lower volatility levels, the corpus put aside for fixed deposits (FDs) naturally makes sure that the core capital remains absolutely secure above all else. If an individual is just beginning various options for investments, investing the same amount as capital is a seamless method of arbitraging risks while receiving an assured maturity amount at the same time.
- Safety & Security– Along with lower risk levels of the actual financial products, the safety of funds may also be carefully assessed on the basis of ratings given by entities such as FAAA (F Triple-A), CRISIL, and other security levels offered by financial ratings. The highest possible security ratings are allocated for Fixed Deposits (FDs), indicating that payment of interest and the security of the principal are factors that continue to remain really strong. You should seek out FD-based products which offer FAAA ratings by CRISIL while also providing some of the best rates of interest. This will help you seamlessly balance the funds in your portfolio without compromising on your overall returns.
- Interest always counts– With regard to Fixed Deposits (FDs), returns are one of the key aspects that most people emphasize upon. Yet, with recent developments in the market, rates of interest have been going up steadily, making this the best time for deploying investments in an FD or fixed deposit. To add to this aspect, the suitable fixed deposit (FD) product is assured to be of immense help for ensuring that you get the maximum value from your investment.
- Compounding and its immense benefits– You can start investing early on and multiply your capital with the sheer power of compounding. An initial small amount may turn higher with proper compounding. This happens whenever you reinvest the compounded interest with the principal amount across the average FD tenure of 6 months to 10 years. Cumulative FDs are ideal for people who do not require interest payouts on a regular basis since interest will then be paid out at the time of final maturity of the FD along with the principal amount. Cumulative FDs and the power of compounding will help you multiply your wealth rapidly over a few years. For non-cumulative FDs, interest will be payable in frequencies that remain fixed.
- Additional Advantages– There are several added advantages of possessing fixed deposits (FDs) in the investment portfolio. Some FDs also come with loan provisions and facilities which help you get smoother access to funds when you require money for meeting emergency requirements. You can get loan facilities against your FDs while they may also be a guarantee for taking any other debt.
On a Closing Note
If you are looking to grow your wealth courtesy of the power of compounding while earning good returns and enjoying the enhanced safety and security of your investment, fixed deposits (FDs) make for the best options in the investment portfolio. FDs can suit every investor, irrespective of age, profession, and investment allocation in a manner of speaking. They can be used for meeting goals with diverse types and tenures. Even high-risk investors looking to balance out their portfolio or simply lower overall risks may consider FDs while those who have a lower risk appetite may consider them for earning more returns in a secure manner without any market fluctuations as well. These are the biggest reasons for including fixed deposits (FDs) in your investment portfolio.