Top Reasons to Choose Fixed Deposits for Secure Investments and Stable Returns

Are you looking for a secure way to invest your hard-earned money with stable returns? If so, you’re not alone. Many are turning towards Fixed Deposits (FDs) as a reliable investment option amid economic fluctuations. In this blog, we’ll delve into the compelling reasons to choose fixed deposits, ensuring that your investment not only grows but also remains protected

Guaranteed Returns:

Fixed deposits stand out in the financial landscape due to their guaranteed returns. Unlike stocks or mutual funds where your earnings fluctuate with market conditions, FDs promise a fixed interest rate throughout the tenure of your investment.

1. Stability: 

With FDs, what you see is what you get. If you're promised an 8% return annually, that's exactly what will reflect in your account upon maturity. 

2. Predictability: 

This makes financial planning much easier. You can accurately calculate how much money you will have at the end of your FD period.

3. Higher Returns:

Fixed Deposits offer higher returns compared to Savings Accounts. You can opt for high-interest FDs to maximise your savings. Additionally, for long-term FDs (tenure more than 6 months), the interest is calculated using the compound interest method. 

Meaning your the accumulated interest also keeps earning interest till the time of maturity. This results in overall higher returns. 

3. Safe and Secure Returns:

FDs are market-proof, meaning your investments remain unaffected even during market downturn. Additionally, FD investments up to ₹5 lakh are insured under DICGC (Deposit Insurance and Credit Guarantee Corporation). 

Chances of losing your money is extremely low compared to market-linked investment instruments, like mutual funds, stocks, bonds, etc.

Flexibility and Accessibility:

One often overlooked advantage of FDs is their flexibility. You can choose from various tenure options—from as short as 7 days to as long as 10 years—based on your financial goals and needs.

1. Payout Options: 

Receive interest payouts monthly, quarterly, or at maturity according to your cash flow needs.

2. Liquidity: 

Need cash for an emergency? You can break your FD. Although there might be a penalty for premature withdrawal, access to funds when needed most is possible. 

However, it's always recommended not to break your FD - you may lose out on higher returns for premature withdrawal. Kindly note that this feature is available only for callable FDs.

3. Loans against FDs: 

Many banks offer up to 90% loans against the deposit amount without breaking it. So, if you're in urgent need of funds, instead of taking a personal loan, you can opt for loan against FD. 

4. Overdraft against FD Facility: 

Banks allow you to withdraw funds against the value of your FD. The overdraft limit is set by the bank and depends on various parameters. You have the flexibility to repay the amount in full or in instalments.

Tailoring Your Financial Plans:

The flexibility to choose the tenure and amount makes choosing FD an appealing option for both short-term and long-term investors.

• Short-term Goals: Save for immediate goals like vacation or electronics with short-term FDs.
• Long-term Savings: Plan for your child’s education or retirement with longer tenures.

Understanding the difference between cumulative and non-cumulative FDs can help you choose the right option based on your needs.

Easy Monitoring and Operations

• Auto-renewal Options: Automate renewing your FD upon maturity to continue earning interests without any hassle.
• Online Account Management: You can open a Digital Fixed Deposit and manage your account on the go.

FD Tax Benefits:

Fixed deposits not only help maximise your savings but can offer tax benefits under Section 80C of the Income Tax Act. This makes them an attractive option for tax-saving purposes without risking capital in volatile markets. 

However, this benefit is available only with Tax-Saver Fixed Deposits. Additionally, Tx Saver FDs come with a lock-in period of 5 years, 

*Returns are subject to market risks

This table may help investors compare FDs with other tax-saving options based on potential returns, risk, and accessibility.