Safety of Savings in Times of Market Volatilities

How fixed deposits help keep your savings safe with assured returns and high interest.
Safety of Savings
4 mins
08 December 2023

In the past, when investors worried about the safety of their investments, they were advised to combat market volatility through investment instruments like mutual funds. However, the recent winding up of six debt funds by a global investment firm has opened a can of worms on the safety of mutual funds too.

A common investment advice to combat market volatilities is to diversify exposure and improve asset allocation by diversifying not just across asset class but also within an asset class. While this works well for an experienced investor with a strong understanding of financial markets, there are several investors who may not always have the time to get into the fine print and keep a tab on the changing market dynamics.

Some investors set aside a significant portion of their savings in fixed-income instruments, where the risk of market volatilities is low. These investors seek guaranteed returns on their savings without any risk involved. The current scenario is conducive to such an approach with a need to create a contingency fund.

Saving with fixed deposit

Individuals with surplus savings may have a higher need to maximise their returns by investing for longer tenors. However, having a surplus doesn’t warrant risky, long-term investments, especially during this unprecedented situation. Right now, it is prudent to earmark your surplus savings as a contingency fund and invest in fixed-income instruments like fixed deposits, PPFs, or government savings schemes. These instruments not just protect your savings from market volatilities but also offer assured returns. While these saving options have their advantages, fixed deposits remain a preferred option for most savers.

Fixed deposit offers safety of your savings, with assured returns. You can customise the tenor, choose the frequency of your interest pay-outs and get started from the comfort of your home. During emergencies, you can also consider availing of a loan against fixed deposit to fund urgent needs without having to withdraw your deposit prematurely.

As a versatile savings instrument, fixed deposits are back in focus, with newer features like Systematic Deposit Plan to help regular savers start saving with just Rs. 5,000 per month. This feature combines the benefit of assured returns and the convenience of investing in a SIP.

Currently, the inflation levels are low and with RBI cutting interest rates, banks have also reduced their savings account interest rates. Thus, holding on to cash in bank may not get you great returns. By saving this amount in a fixed deposit, you can create a cash or cash-equivalent ladder to meet expenses for the next few years, or even plan life goals by having your FD mature at regular intervals and re-investing the returns.

Sachin Sikka is Chief Business Officer – Retail & Corporate Liabilities, Bajaj Finance Limited. As part of the management team, he is accountable to lead Retail & Corporate Liabilities' business, as a strategic diversification of the treasury's borrowing to strengthen the growing balance sheet.

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As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.