Site icon Kuvera

Five Reasons Why Having Fixed Deposits In Your Portfolio Is Good

Fixed Deposit

Investing is primarily driven by our needs, wants, and objectives. The abundance of available financial options makes personal finance quite challenging. Fixed deposits (FDs) have successfully met the financial needs of an entire generation, and the vast majority of investors still prefer to place their funds in them. 

 

 

Asset allocation is one of the best ways to build wealth. There are a variety of asset classes, including equities, gold, fixed deposits, etc., and each plays a unique role in the investment portfolio. On the one hand, mutual funds generally offer long-term growth potential for funds, whereas fixed income options such as fixed deposits provide portfolio stability through their guaranteed returns. If the investment portfolio is appropriately diversified across asset classes, including FD, it ensures that the volatility of the investment returns is minimised and that investors have a stress-free investment experience.

 

What are Fixed Deposits?

 

A fixed deposit, also known as an FD, is an investment instrument offered by banks and Non-Banking Financial Companies (NBFCs) to help their customers save money. With an FD account, individuals can invest a certain amount of funds at a predetermined interest rate for a specified time period. This is a good way to save money because, at the end of the term, individuals receive the lump sum, along with an interest rate.  Different interest rates are offered by banks for fixed deposit accounts.

 

How Does a Fixed Deposit Work?

 

The fund invested in the fixed deposit account remains locked for the predetermined period, during which a customer deposits money and earns interest. Customers have the option to invest for a duration usually between 7 days and 10 years through banks. The amount can still be invested for the desired tenure after the maturity period. Customers are not allowed to take money out before it matures, but if they do for any reason, they usually have to pay a penalty. After the maturity of a fixed deposit, the bank transfers the principal plus interest to the customer’s bank account. 

 

Features of Fixed Deposits

 

A few important features of fixed deposits are as follows:

 

 

 

 

 

 

 

A Few Reasons To Have Fixed Deposits In A Portfolio

 

 

In the investing portfolio, various assets serve various purposes. A fixed deposit is viewed as a particularly secure investment option due to its assured returns and stability, in contrast to equity investments such as stocks, mutual funds, and shares, which are subject to market volatility. Unlike other investments, generally, investors are assured of a return when they invest some amount of money.

 

 

A fixed deposit generally has a minimum duration of six months, which can be extended up to a maximum duration of ten years or more. This time frame ensures that an investor will earn the highest possible returns on their investment over a specified time period. Therefore, by looking up the tenure and rate of interest to be earned on a predetermined deposit, one may find out the precise amount that can be received after the fixed tenure.

 

 

A fixed deposit is regarded as the best investment option if individuals are trying to meet their short-term goals. One may desire to achieve a short-term objective within one to three years of their investment. These objectives’ main goal is to safeguard the principal amount while also earning some interest. For instance, short-term goals could be setting a date for the family’s next vacation or purchasing a type of technology for the home in a year. Because investors may invest in a fixed deposit according to their budget and if they calculate the expected return at the time of investment, they can achieve these short-term goals.

 

 

Users are aware of the amount they will receive as a return when investing their money in a fixed deposit scheme. They will get the same interest rate throughout the duration of the FD scheme as arranged at the time of purchase, regardless of the country’s economic situation and the current rate of interest on FDs.

 

 

With the advancement of banking technology, investors are no longer required to visit a bank in person to open or renew a fixed deposit (FD). Nowadays, it is simple to do so at the investor’s convenience using internet banking or mobile banking.

 

The added benefit

 

In addition to all of this, there are a number of other advantages to including FDs in the investment portfolio because they come with loan facilities that make it simpler for investors to access money in times of need, whether they are looking for security, certainty, or just plain comfort in terms of returns and benefits. 

 

Fixed Deposit Types

 

Let’s discuss some of the categories of fixed deposits available in India:

 

 

 

 

 

 

 

 

Conclusion

 

The benefits and reasons for investing make it abundantly clear that a fixed deposit is a very profitable and advantageous choice for stabilising and expanding the investment portfolio. Fixed deposits are a popular form of investment in India due to their low-risk profile and high return guarantee. Each financial institution determines its own interest rates based on the term, which typically ranges between 4 – 8 %.

 

Frequently Asked Questions (FAQs)

 

 

A few points to be considered before investing:

 

 

 

 

 

 

 

Due to its numerous advantages, a fixed deposit is regarded as one of the safest investment options and is considered the preferred investment product by many investors worldwide. A fixed deposit also referred to as a term deposit, is one of the most reliable financial instruments available. For instance, based on your selected interest payment plan, you receive safe, stable, and fixed returns on a defined date. You have the option of monthly, quarterly, and semiannual interest payment plans. Some of the benefits of investing are as follows: 

 

 

 

 

 

 

Interested in how we think about the markets?

 

Read more: Zen And The Art Of Investing

Watch/hear on YouTube:

 

 

Start investing through a platform that brings goal planning and investing to your fingertips. Visit Kuvera.in to discover Direct Plans and Fixed Deposits and start investing today.

#MutualFundSahiHai #KuveraSabseSahiHai!

Exit mobile version