How Yield Matters in Long-Term Investments
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How Yield Matters in Long-Term Investments

  • Highlights

  • Long term investment helps in wealth creation

  • You can invest in FDs for long-term

  • Long-term FDs provide larger yields

  • You can choose non-cumulative or cumulative option

Investments that are relatively safe and offer fixed returns can also help in generating wealth in the long term. Fixed Deposit is a reliable option that helps you earn interest on your money at intervals. These intervals are based in the payout scheme that you select at the time of the investment.

Like the savings account, returns from FDs are fixed and secured, but the FDs provide higher returns than the savings account. The longer you are invested, the better are the yields. The yield is the income return on an investment.

Let’s Understand How FDs Give Higher Yield

There are different ways you can generate wealth from FDs in the long run.
Non-banking financial institutions (NBFCs) provide higher rate of interest for investments of longer duration when compared to the short-term investments. The interest rate for a 3 or 5-year FD is higher than that of 1-year FD.
You can choose a cumulative or non-cumulative FD, depending on your requirements.

In the cumulative option, the yields increase if you stay invested for long, due to the cumulative effect.

Cumulative Scheme

You can use FD calculator of NBFCs such as Bajaj Finance to know your yield in the long run.

For an investment of Rs. 1 lakh, you (as new customer) get an interest of Rs. 7600 for a tenor of 12 months. However, for a tenor of 60 months, the interest of Bajaj Finance FD is Rs. 45,915 due to the cumulative effect.

Benefits of Non-Cumulative Fixed Deposits Bajaj Finance

 

Non-Cumulative Scheme

A new customer of Bajaj Finance FD earns a total interest of Rs. 7460 for a non-cumulative quarterly payout if the tenor is 12 months. For a tenor of 60 months, the total yield is Rs. 38,500.
Therefore, staying invested for longer duration gives you higher yields, both for cumulative, and non-cumulative schemes.
Under non-cumulative schemes, the intervals could be monthly, quarterly, half-yearly, and yearly.
It is to be noted, that the figures are indicative, as they are subject to change.

Larger yields can support your long-term financial goals. These could include:
- Higher education
- Organising wedding and parties
- Putting your feet up through vacations
- Medical emergency
- Increasing insurance premiums and so on.

Therefore, investments in fixed deposits can help you earn higher yield if you choose to stay invested for long duration.

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