Choosing between short-term and long-term FD

As the names rightly suggest, long-term FDs and short-term FDs vary in the tenor selected.

Those looking for more significant gains can opt for a long-term FD. The principal amount compounds over time when you invest for a longer tenor, enabling you to earn more on the accrued interest. Also, you tend to get a better interest rate with long-term FDs.

Although short-term FDs earn you a relatively lower interest rate, they allow you to ladder your investments and benefit from better liquidity. You can also make the most of any increments to the FD interest rates. While both have their respective pros and cons, choosing the right one depends purely on whether you are investing to meet short-term or long-term goals.