Why should you open a Fixed Deposit Account?
Financial management is an important aspect of life management. There are many financial tools like Fixed Deposit (FD), shares, mutual fund, insurance, annuity plans, and real estate among many others. Among all these investment vehicles, fixed deposit is the most appealing to many investors because of unique benefits like the ease in investing, protection of capital, fixed income, and liquidity in case of an emergency.
Growth
When you chose the cumulative option of the fixed deposit, you are using the power of compounding. Your Interest on FD are earned every three months, and the same is added back to your principal amount. Henceforth you will be eligible to earn the interest rate on the higher amount of the principal. Over the years, this process can create wonders and generates sizable wealth for you. Moreover, the FD interest rate is also higher for the cumulative deposit. If you are young professional with regular salary income or earning, it is highly recommended to opt for the fixed deposit with cumulative growth option.
Build at Your Pace
If your earning is limited in initial years of careers, you can opt to save in small but regular intervals. Consider opening Recurring Deposit, which is almost same as Fixed deposit. Instead of investing the lump sum, you can invest in small monthly installments in the recurring deposit. After one or two years, you can realize the savings of a notable amount in your account.
Regular Income
If you are a senior citizen or you need regular monthly income, fixed deposit scheme gives you an option to book the FD under non-cumulative option. You can avail periodical income at a pre-defined interval. Usually, the intervals available are monthly, bi-monthly, quarterly, half-yearly and yearly. Based on your expenses and suitability, you can choose the interest payment intervals. In this option, the rate of interest is slightly lower than the cumulative deposit, but it serves your purpose to avail regular income.
Emergency Fund
Not every day in life is the same. You may need emergency money to treat your near and dear in the hospital. Sometimes your planned loan application gets rejected due to reasons beyond your control. Such a sudden shortfall or unexpected outgo of money should not stop you from maintaining the priorities in your life. You can easily avail the loan on the Fixed Deposit, or you can break it to access the fund in an emergency. The liquidity is the most appealing feature of the fixed deposit. Also, you can calculate the returns from FD using the online FD rate calculator. Read about Investment on gold : Five Things to Know Before You Start Investing In Gold
Risk Management
It is well said that you should not put all the eggs in one nest. If something goes wrong, your entire portfolio may be at high risk. You might be able to earn good returns from investing in equity or gold, but many variables are beyond your controls. In worst cases, you may lose your capital. The investment in real estate can generate huge return, but you cannot buy and sell as per your wish. Liquidity is the high concern in real estate investment. However, there are certain basic requirements of life, like food, shelter, medicine, children’s education – that you cannot postpone till the market recovers. It has to be performed in a time-disciplined manner. Hence, there must be a source of fund for you that you can rely upon, irrespective of market fluctuations. Such a source is a fixed deposit that pays you promised interest amount and repays your capital on the maturity date; no matter the market is going up or down. You can manage your risk with confidence when you invest in Fixed Deposit.
Protection of Capital
The investments like shares, mutual fund and real estate do not guarantee to protect your capital. You may get a windfall out of your investment, or you may lose a significant portion of your investment. On the other hand, the fixed deposit ensures that you will get your money back on the date of maturity. Although every fixed deposit is not safe, you can rely on quality FDs rated by CRISIL and ICRA. For example, the Fixed Deposit scheme of Bajaj Finance is rated as FAAA and MAAA by CRISIL and ICRA Rating respectively. These ratings are the highest available ratings indicating very strong possibility of the return of capital and high credit quality of the investment.