Is a 1-year fixed deposit a good investment?

Whether a 1-year fixed deposit (FD) is "good" depends entirely on your individual financial goals, current financial situation, and investment objectives. Here are some factors to consider:

1. Short-Term Stability: A 1-year FD offers a relatively short commitment period. This can be beneficial if you anticipate needing the funds within the next year for a specific goal, like a down payment, a vacation, or unexpected expenses. You can also opt for a non-cumulative FD with an annual interest payout as an alternative to a 1-year FD.
2. Predictable Returns: FDs offer a fixed interest rate, meaning you know exactly how much your investment will grow over the 1 year. This predictability can be appealing compared to more volatile investment options.
3. Liquidity: Some banks and NBFCs provide a 1-year lock-in period. While ideally it is advisable to keep money in an FD for longer tenures, a 1-year tenure can provide some level of access to funds in case of an emergency.
4. Loan on Deposit: For temporary financial needs, you can also opt for a loan on deposit. You can get up to 75% of your deposit amount.

Points to Consider:

• Returns vs. Tenure: Longer FD tenures generally offer higher interest rates due to the compounding effect. If you don’t need immediate access to your funds, you may consider a longer tenure for potentially better returns.
• Inflation Impact: If inflation exceeds your FD interest rate, your real returns may be lower.
• Taxation: Interest earned on FDs is taxable as per your income tax slab, which may affect your net returns.