Fixed Deposits (FD) are a common and reliable investment choice known for their stability and assured returns. In this article, we will discuss, benefits of investing in FD, factors that influence FD rates and how much monthly interest can be earned by investing Rs. 50,000 in an FD.
What is fixed deposit?
A fixed deposit (FD) is a financial instrument offered by financial institutions (banks and NBFC) where individuals deposit a lump sum amount for a fixed tenure at a predetermined interest rate. FD provides a stable and secure avenue for individuals to park their funds and earn a fixed return over a specified period. The principal amount, along with the accrued interest, is paid back to the investor at the end of the maturity period.
Benefits of investing in fixed deposit
- Safety and stability
Fixed deposits are renowned for their safety and stability in the financial market. When you invest in an FD, your principal amount is safeguarded, and the returns are fixed. This makes FD a preferred choice for risk-averse investors. This stability is particularly valuable during economic uncertainties or volatile market conditions.
- Flexible tenure
Fixed deposits offer flexibility in choosing the tenure of the investment. Investors can opt for short-term or long-term deposits based on their financial goals and liquidity needs. This flexibility makes FDs adaptable to various life stages and financial planning requirements. Bajaj Finance offers tenure from 12 months to 60 months on their FD.
While fixed deposits come with a fixed tenure, they also provide a degree of liquidity. In case of unforeseen financial needs, investors can opt for premature withdrawal, although it may attract a penalty, check with your financial institution before investing. Bajaj Finance offers loan against FD, so that you don’t need to prematurely break your FD.
- Diversification of portfolio
Investing in fixed deposits is a great way to diversify your investment portfolio. FD are generally considered low risk and provides fixed returns. This can help in balancing out riskier investments like stocks or mutual funds.