Why FDs should always be part of your financial plan

A fixed deposit (FD) is an investment option which helps you in increasing your wealth and preserving your funds for your future. Despite the cuts in the FD rates, FDs continue to top the ranks among the best investment options. Most of the people are unaware that FDs are the most reliable investment option which offer excellent returns in the long term. With the advent of the internet, today one can even open FD online. Banks today offer most of the facilities online and a customer can avail most of these services from the comfort of their home.

One of these services which banks are offering online is FD calculator which helps you to find out how much you could earn on your fixed deposits. The FD calculator also lets you identify your maturity amount and the interest that you would earn when you open an FD.

FDs are simple and plain vanilla investment options. Unlike investment in securities and market-linked investments, FDs are risk-free. With this low risk together with guaranteed returns, FDs offer huge financial advantages to investors. Some of the benefits which make FDs an important constituent of your financial plan include:

• Assured Returns – The ROI (return on investment) is guaranteed with FDs. FD would earn you the interest at the rate that exists at the time of making such deposit. Fluctuations in the market won’t impact returns on your investment. Probably that’s the reason why most of the experienced investors keep a portion of their investment in FDs.
• Types of FDs to suit your requirements – FDs aretypically of two types – cumulative and non-cumulative. In case you’re seeking for better maturity, cumulative FDs are best for you. Cumulative FDs offer returns after the lapse of the pre-defined tenure, whereas in case of non-cumulative FDs the pay-outs can be monthly, quarterly or semi-annually. Non-cumulative FDs are good for financing the post-retirement expenses; one could invest in the non-cumulative FDs mimicking a monthly salary.
• Flexible Tenures – Fixed Deposits come with flexible tenures. The tenure ranges from seven days to ten years, depending on your needs. You could also have multiple FDs in a bank at the same time for different or same tenures.
• FD as collateral – There could be numerous occasions when one would require additional funds in order to meet urgent obligations or medical emergencies. In such scenarios, one has the provision of pledging his FD as collateral for the purpose of loan. Loan against FDs could easily help you in financing a cash crunch.
• Tax benefits – Tax Saver FDs are a good way of getting tax benefit under Section 80C. You could claim income tax deduction to a maximum of INR 1,50,000 by investing in FDs. The lock-in period for the tax saving FDs is five years which could be up to 10 years. A pre-mature or partial withdrawal isn’t allowed. Also, investors can also nominate someone for receiving the proceeds of the deposit in case of demise of the depositor.
• Higher interest rates for Senior Citizens – FDs are very popular among the senior citizens owing to their higher rate of interest. The interest rate is usually better for senior citizens as compared to general accounts and interest rates for senior citizens are usually 0.50% higher than other customers.

So, in case you’re seeking an investment option which is secure and offers assured returns, an FD is a foolproof investment alternative. Irrespective of the type of FD you choose, your returns are free from any market fluctuations.