Introduction
The world is going through tough times. At a time when automation is taking away most jobs and earning money has become more challenging than ever before, only a stable fixed deposit can help us sail over the crisis.
This article points out the top 5 reasons why you should consider investing in a fixed deposit.
1. Fixed Deposits Offer High Returns
Out of all legal mediums for investing, three mediums are the most popular. The first is a sovereign saving scheme like PPF or NSC. The second is an investment in equity markets through SIPs or brokers. The third is investing in fixed deposits.
While PPF offers high returns and carries a sovereign guarantee, you cannot withdraw the entire money before 15 years. NSC, on the other hand, allows you to park your money for a maximum duration of 5 years.
Equity markets promise to offer higher returns than both PPF as well as fixed deposits. But there is no guarantee that you will be in profit when you need to withdraw your money.
Only a fixed deposit is one such financial instrument that allows you to invest for a period between 7 days and 10 years. It doesn’t carry with it the risk you would find in the capital markets. With fixed deposits, you get high returns as you see; no strings attached.
2. Fixed Deposits are Secured
Look around, and you would find various ‘get rich quick’ schemes in some form or the other. On closer scrutiny, you would discover that a majority of these schemes vanish as quickly as they arrive in the scene, taking away with them the investors’ hard-earned money.
Fixed deposits offer security, which in current times, is even more important than high returns.
3. Fixed Deposits Offer Liquidity
We park our excess money in financial instruments to get higher returns. But what if you require the money urgently?
Although life insurance policies and PPF allow partial withdrawals, the rules are quite complex, and therefore, withdrawing money during times of need can be challenging.
Just like it is easy to invest in an FD, it is easy to withdraw from an FD. The best FDs allow you to enjoy complete authority over your funds. You may withdraw partially, apply for an overdraft, or withdraw the full amount by paying a small penalty.
4. Fixed Deposits are Tax-Efficient
When it is about saving tax, PPF, NSC, and life insurance policies are considered the best mediums. Contrary to popular belief, a fixed deposit is an excellent tool to save taxes. You may save TDS of up to Rs. 5000 if you invest in a company FD, which usually offers higher interest rates than banks. If, however, you choose a bank, then you may get tax benefits of up to Rs. 10000, but the low returns offset the tax benefits.
5. Fixed Deposits Offer Flexible Withdrawal Options
This is one of the main reasons why fixed deposits are so popular. You may withdraw a fixed amount on a monthly, quarterly, half-yearly, or yearly basis.
The fixed deposit interest rates depends on the frequency of interest payment. For example, a CRISIL FAAA rated financial institution gives a 7.70% annual interest for a deposit of 5 years and above. The interest rate reduces to 7.40% when you opt for monthly payouts.
Conclusion
Fixed deposits are safe, secure, and provide high returns. For getting assured high returns on your investments, you may also look beyond traditional banks.
