If you have surplus funds parked in your bank account as idle balances, the returns on such amounts may be minimal. Depending on your financial goals and risk preference, you may consider options such as mutual funds, shares, or fixed deposits. While market-linked investments are subject to fluctuations, fixed deposits are useful financial instruments that provide fixed returns for a defined tenure, subject to applicable terms and conditions.
Reasons to Invest in Fixed Deposits
Consider allocating funds across different financial instruments based on your goals and risk preferences. Fixed deposits provide fixed returns for a chosen tenure and are structured savings options for individuals seeking defined outcomes. The following points outline some commonly cited features of fixed deposits, subject to applicable terms and conditions.
Here are the major reasons to make an investment in fixed deposits
Fixed deposits are regulated investment options
All the financial institutions operate under strict rules and regulations as set by the Reserve Bank of India. Deposits are governed by applicable regulatory frameworks and institutional policies
Additional Benefits on FDs for Senior Citizens
It may be a suitable option for senior citizens, depending on their financial needs. A senior citizen must invest in fixed deposits and earn a monthly interest income to meet their daily expenses with ease. When senior citizens invest in fixed deposits, they may provide maturity instructions or modify payout preferences in case of financial needs, subject to applicable product terms and conditions.
Offers Better Interest Rates
A fixed deposit allows you to earn interest at a predetermined rate for a selected tenure. Interest rates vary depending on the tenure, deposit amount, and the financial institution’s prevailing rate structure, subject to change and applicable terms and conditions. By committing funds for a defined period, the financial institution pays interest as agreed at the time of booking.
Premature Closure
Fixed deposits may offer the option of premature closure in case of financial requirements, subject to applicable product terms, conditions, and any penalties that may apply. Certain fixed deposit variants may have specific lock-in conditions as per their respective terms.
Compounding Option in Fixed Deposits
When opening a fixed deposit, investors may choose between cumulative and non-cumulative interest options. In the non-cumulative option, interest may be paid out at periodic intervals such as monthly, quarterly, or yearly, depending on the selected pay-out frequency and applicable product terms.
In the cumulative option, interest is reinvested and added to the principal amount. Over time, interest is calculated on the accumulated amount, which may increase the maturity value due to the effect of compounding, subject to the applicable interest rate and tenure.
Flexible Tenure
To suit the varied needs of investors, most financial institutions offer FD tenures starting from 12 to 60 months, depends on the institution’s policies. Always choose the tenure carefully to get the maximum return on the investment. The interest rate depends on the chosen tenure. So, select a tenure that aligns with your financial goals, liquidity needs, and planning horizon.
Conclusion
If you ask Indians where to park their excess or surplus funds, the majority will go with the option of fixed deposits. These investments go synonymous with financial maturity. At times of financial uncertainties, the fixed deposit often comes up in discussions as a preferred option due to their predictability.
It is advisable to review the features, interest rates, tenure options, and applicable terms and conditions before making an investment decision.
For more information on fixed deposit options, you may explore the official website of Shriram Finance and review the applicable product details before investing.