fixed deposits Archives -

How to Invest in Fixed Deposits to Get Maximum Returns?

Sun, 10 Jul 2022 17:05:19 +0000

The Buyt Desk

This is a good time to invest in bank fixed deposits. As the Reserve Bank of India hiked the Repo rate and following this the banks started to increase the Fixed deposit (FD) interest rates. In the last one month, many banks have revised their FD interest rates on different tenures. Major Banks including Bank Of Baroda, SBI, Kotak Mahindra Bank, PNB, IndusInd Bank, ICICI Bank, HDFC Bank and many more including some NBFCs have increased their interest rates on FD. If you do not want to take risks and get a guaranteed return then FD is considered a good option. You can further increase your returns from FD by following a few things while starting FD. Below are a few tips and tricks to smartly invest in Fixed Deposits to get maximum returns.

Go for short-term fixed deposits

Whenever there is a change in Repo rates, short and medium-term FD interest rates are the first to get affected when compared to long-term FD interest rates. So when you invest in a short or medium-term maturity FD you will enjoy higher interest rates as these are the first to increase interest rates when it starts to rise. To increase your returns and to get maximum benefits from FD, invest in Short to medium-term fixed deposits.

Utilize floating rate options

Floating FDs is another way to increase your ROI on FDs. These will allow investors to avoid locking money for a long period with less FD rates. Floating FD interest rates are directly linked to the repo rate which means the interest rates change as the repo rate changes. Under this FD scheme, investors can invest in FDs without stressing about the Repo rate increase. As repo rates increase, the FD interest rate also increases. As there is a hike in repo rates, the investors in floating FD will be benefited as they will get higher returns without doing anything.

The fixed deposits ladder approach

Fixed deposit laddering is a way to get a guaranteed good return on FD investment. Its concept is the distribution of funds into different FDs of different tenure. By dividing a lump sum into various FDs of different maturity, you will be creating an FD ladder plan. This means, that one or the other FD matures every year.

Instead of having one large FD, split it into many smaller FDs with tenure such that one matures every year. For example – you can split your Rs 5 lakh FD into 5 FDs of Rs 1 lakh each, with tenure of 1 year, 2 years, 3 years, 4 years, and 5 years each. After a year, one FD matures. Now extend the term of this FD to 5 more years. And after 2 years another FD of 2-year tenure matures. Now extend the term of this FD to 5 more years. Doing so, you will have 5 FDs maturing every year for the next 5 years. This is how you will be creating FD ladder by performing this exercise every year. Using the FD ladder strategy, you can save yourself from your lump sum investment being locked in at the lowest interest rate for the long term. This way FD ladder will maximize your returns.

Avoid making long-term fixed deposits

When your FD investment term ends and you want to reinvest in FD, renew it to shorter-term deposits. Even when you want to make fresh investments choose shorter-term deposits. This is done to take advantage of interest rate hikes. Also locking in your money for a long time in long-term fixed deposits is not ideal.

Avoid prematurely withdrawing from FD

Premature withdrawals will stop the magic of compounding. And this will hamper your way of wealth creation to reach your financial goal. A premature penalty may be charged. To maximize return, do not withdraw the FD before maturity.

Choose an investment plan and tenure smartly

Select the tenure based on your financial goal. Always go for FDs which are cumulative unless you are in need of money. If you are not in need of money, you can reinvest the interest earned back in the FD else you can take the payout for your expenses. Taking payout will not compound your investment and it doesn’t grow. For higher returns, opt for cumulative FD.

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Mutual Funds Or Fixed Deposits: What Is Better?

Wed, 20 Apr 2022 15:05:18 +0000

TheBuytDesk

The Fixed Deposit (FD) is a popular and preferred investment option among investors. Reasons – there is no risk, earn interest, save tax. Therefore, when a traditional investor is given the mutual funds option, they get into a dilemma, whether to invest in mutual funds or not?

So, here is a quick comparison between mutual funds and fixed deposits, which is better and why. The reason is that both investments are different on investment track, although common among investors.

What Is A Fixed Deposit?

In the fixed deposit, you invest a lump sum amount for a fixed tenure that ensues interest, which is pre-decided. In FD, the returns remain unaffected by the market fluctuation. Though you don’t earn enticing interest, you don’t lose anything either.

What Is Mutual Fund?

The mutual fund, on the other hand, is a financial instrument having a portfolio of bonds, equities, stocks and market-linked securities and instruments. In the mutual fund, multiple investors invest in a fund, and they all have a common aim, earning a good return on investment and growing their savings. After maturity, investors get their share of profit after the deduction of expenses incurred by them. The two investment options, mutual funds and FD have different qualities, and thus the benefits they offer also differ.

Mutual Funds or Fixed Deposit: What should you choose!

To help you understand both the avenues of investment let’s look at them piece by piece and understand their features.

What do you get when you invest in Mutual Fund?

A mutual fund is a professionally managed product. The experts in the field with performance analysis of various industries create a suitable portfolio for investors.
Mutual funds invest in equity, gold and in fixed income options.
The thumb rule of investment is a diversified portfolio. Mutual funds are a pool of companies from diverse industries and sectors. Diversification reduces the loss risk.
Over time, i.e. in long term investment, the mutual fund provides a higher return as they invest in different baskets of securities.
Mutual funds are considered a low cost. If taken into account the overall cost, such as brokerage, fees and custodial charges, its cost is less than stocks.
It is registered under SEBI and monitored by it regularly.
In mutual funds, you can find products matching your requirements. You can invest and withdraw the amount from a mutual fund based on your needs

What do you get when you invest in Fixed Deposit Investment

With the fixed deposit, you have the assurance of receiving the stated interest rate. The Bank and Post Office publishes the rate of interest they are offering on their website. According to their requirement, customers pick the product and invest money. It can be a recurring or lump sum.
The fixed deposit comes in different tenures. Banks offer FD for various periods of time, however, it is always the customer who decides for what period they want to keep the money in FD.
You can liquidate FD at any time but it comes with a cost. FDs come with a time-bound maturity and may charge you a penalty if you withdraw it prematurely. Some of them also have locked tenure.
It is a dependable instrument. One can take a loan against FD easily. One can take a loan of up to 90% of the deposited amount.
As far as the return is concerned FD will score low in front of mutual funds. The rate of interest in FD is low when compared to the return that mutual funds offer in a long term investment.

Both investments have their own advantages and disadvantages. The only thing that an investor should consider while choosing his/her investment is what is their goal, how much time they want to achieve it and how much risk can he/she take If he/she has a longer time horizon then they can choose an investment like a mutual fund but if he/she is risk-averse and prefers a fixed return then a bank FD is more viable.

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Different Types Of Fixed Deposits And Its Eligibility Criteria

Mon, 17 Jan 2022 09:54:15 +0000

The Buyt Desk

Fixed deposit is one of the safest investment options for those who refrain from risks. In a fixed deposit, the individual basically locks an amount for a set period and earns interest on the principal amount throughout the tenure on a cumulative basis. Banks offer different types of fixed deposits. Depending on the FD types, its interest rate and other benefits vary. The procedure to open a fixed deposit is simple. An individual can open it in any bank regardless of, he has an account in that bank or not. However, with banks, if you don’t have a savings account, you must complete the KYC.

Different Types Of Fixed Deposits

Regular Fixed Deposit – The features of regular fixed deposits are

The investor deposits the amount for a fixed tenure.
The tenure of the deposit could be between 7 days to 10 years.
The interest rate of this account is higher than the savings account.

Tax-Saving Fixed Deposit – The fixed deposit gives tax-saving benefits along with an opportunity to earn interest.

Tax exemption on the principal deposit amount in a calendar year is 1.5 Lakhs.
It has a lock-in period of five years. One cannot withdraw an amount during this period.
Allow deposit of one time lump sum amount.

Senior Citizen Fixed Deposit – This fixed deposit product is available only for senior citizens, i.e. people above 60 years of age. The features of this product are:

It comes with flexible tenure.
Senior citizens get a special rate of interest on the same.

Cumulative Fixed Deposit – This is a kind of FD in which you deposit an amount in the account every month for a set time. In this FD you will get the earned interest upon the account maturity. The tenor of this fixed deposit ranges from 12 months to 60 months.

Non-Cumulative Fixed Deposit – In a non-cumulative fixed deposit, the bank or any other financial institution pays an interest rate at a regular interval of time. The investor can choose the frequency of payment according to his/her convenience. It can be monthly, half-yearly and yearly. Here also, the tenure of FD ranges from 12 months to 60 months.

NRI Fixed Deposit – It is one of the safest investment options for NRIs. It provides a higher interest rate in comparison to the regular FD. The tenor of this FD ranges from 12 months to 60 months. It also gives the option of multi-deposit and easy renewal. NRI can deposit in this account via NRO account, overseas citizens of India can deposit in it via OCI and People of Indian Origin via PIO.

Company Deposit – This is offered by companies or NBFC’s and not by banks. It comes with a higher interest rate than the different types of the fixed deposit we have already discussed. However, before investing in this FD, you must do a thorough background check of the company and check its authenticity. There have been several scams in India where a high interest was offered and later investors were duped.

Bank Fixed Deposit – These are FDs banks offer to customers who have a savings account in the same bank. Some banks provide additional features like an insurance benefit of Rs 5 Lakh. However, their interest rate remains lower than other FD options.

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