5 benefits of adding Fixed Deposits to your portfolio
The Covid-19 pandemic has taught us to value and save for rainy days. While saving is essential to building a financially sound future, relying on them alone does not make sense. If you have already managed to set them aside, consider some ways to make your money grow over time.
There are many instruments available today, including Fixed Deposits. Nowadays, banks offer an attractive interest rate on FD since it is one of India’s most trusted financial products. Consider these compelling benefits of adding it:
Guaranteed returns
Unlike volatile Stock Market Investments, an FD comes with assured returns. When you invest in it, you know the amount received at its maturity. Irrespective of the fluctuating interest rates and the economy’s performance, the returns are fixed according to the FD interest rates set by the bank.
Reduced portfolio risk
Every asset category, whether gold, stocks, FD, or Equity, plays a different role in your investment portfolio. So, while an instrument like Mutual Funds brings growth potential to your money, an FD, with its guaranteed returns, brings stability to your portfolio while minimising the risks involved.
Easy access to Loans
You may easily apply for a Loan against your FD whenever you need funds. The sanctioned amount is typically between 70% and 95% of your accumulated deposit amount, although this may vary between banks. Since it offers flexible usage, you need not worry about interrogations.
Flexibility
Hard times come without warning. An FD can be a saviour as it allows you to withdraw funds before maturity. Though you may need to pay a small fee, the process is relatively simple. Additionally, you can choose between Non-Cumulative and Cumulative interest rates. Opting for Non-Cumulative rates means you receive quarterly or monthly payouts to pay bills and EMIs out of the interest income.
Choosing the latter means keeping your savings locked up until the tenure ends. This way, you gain from the compounded interest rate on FD.
Tax benefits
The interest or the returns earned from an FD are exempt from tax up to Rs. 10,000 in a financial year. Tax-Saving FDs come with a five-year lock-in period. Their returns, exempt under Section 80 C of the Income Tax Act, 1961, offer relief of up to Rs. 1.5 lakh per annum. It is ideal for encountering short-term financial goals, like a family wedding or a child’s education.
Conclusion
To invest in a high-interest FD, select from multiple options for interest payment and flexible tenures. Nowadays, you can book your FD online through the website or the app with hassle-free and instant account opening. Secure your savings today and build an emergency fund for tomorrow!