Fixed deposits have long been a popular investment option, offering guaranteed returns and security of capital. Fixed deposits come with a variety of choices, including different tenures, interest rates, and payout options. It is the preferred investment type for people who seek secure options for investment. This is because Fixed Deposits are not subject to market risks. Hence, the returns on them are guaranteed and do not get impacted by the volatile nature of the market.
Fixed Deposit Vs Mutual Funds
Choosing between Fixed Deposits and Mutual Funds depends on the investors’ needs, risk appetite, and investment goals. Fixed Deposits are best suited for investors who seek low-risk guaranteed returns. Mutual Funds offer the potential for higher returns but carry a higher risk, making them suitable for investors looking for higher returns over the long term. Before investing, it is essential to learn about your desired investment choice and understand the risks and benefits associated with it. It is also a good idea to seek professional financial advice while making investment decisions.
Choosing the best fixed deposit plans can be a daunting task, especially with so many options available. Here are some key tips to help you select the best-suited fixed deposit plan.
1. Set Your Investment Goals
The first step is to determine your investment goals. Are you investing for a short-term or long-term period? Do you want to save for a specific goal, such as a child’s education or a down payment on a house? Knowing your investment goals will help you select the right fixed deposit plan.
2. Check Interest Rates
Interest rates offered on FDs can differ from bank to bank and tenure to tenure. Always compare the interest rates offered by different banks to ensure that you get the best rate for your investment. It is also essential to note that FD interest rates for senior citizens are higher than those for regular depositors, so if you are a senior citizen, make sure to look for banks that offer premium interest rates.
4. Compare Maturity Amounts
Although interest rates are essential, it is important to compare the maturity amount to determine your earnings. Using a fixed deposit app, you can easily compare the maturity amounts of different fixed deposit plans. These apps take into account the interest rate, tenure, and payout frequency to determine the final maturity amount.
4. Check Payout Options
Fixed deposit plans come with different payout options, such as monthly, quarterly, half-yearly, and annual payouts. Monthly payouts can be beneficial for those looking for a regular income stream. However, they may not be the most profitable option compared to annual payouts. If you do not need a regular payout, consider opting for an annual payout to maximize your returns.
5 . Check for Penalties
Banks typically charge a penalty for premature withdrawal of a fixed deposit. In case of sudden financial needs, you may have to break your fixed deposit before the completion of its tenure. Check for the penalty charges beforehand to avoid any losses.
6. Check for Auto-Renewal
Some banks offer an auto-renewal option, where they renew the fixed deposit for the same tenure upon maturity. This option ensures that your investment continues to earn interest without any lapse in the extra formalities of reapplying. However, always check the interest rate offered on renewal since it may differ from what you had earlier.
7. Check for Trustworthy Banks
Always invest in trustworthy banks that are FD insured. FD insurance ensures that your investment is protected up to a certain amount, usually INR 5 lakhs. Investing in a trustworthy bank ensures that your investment is safe and secure.There are banks like HDFC, ICICI, Kotak Mahindra, Axis & Non-Banking Financial Companies like Bajaj Finserv, Shriram Finance, etc that offer competitive interest rates on Fixed Deposits. They also provide special returns for senior citizens.
Tip 8: Check the tax implications
Fixed deposits attract tax implications as the interest earned is considered as income and taxed accordingly. You need to consider the tax implications before choosing a fixed deposit plan. If you fall under a higher tax bracket, you may want to choose a fixed deposit plan with a longer tenure, as it can help in reducing the tax amount by spreading the interest earnings over multiple financial years.
In conclusion, choosing the best fixed deposit plans requires careful consideration of the interest rates, maturity amount, payout options, penalties, and bank reliability. Using a fixed deposit app can help you compare plans easily. Always remember to set clear investment goals to choose the right plan that suits your needs. A fixed deposit investment is an excellent way of securing your money and earning guaranteed returns, and with these tips at your disposal, you can ensure that your investment works for you.