Strong yields are directly proportional to the risk of the investment. Although there are currently many high return potential investment opportunities, they also enable you to bear a higher degree of risk for which most investors are not comfortable.
Fixed Deposits can be a perfect choice for investments that are stable and deliver high returns. FDs are one of India’s most common investment choices.
Protecting your resources is a priority when you build your financial portfolio, and as such, fixed deposits are necessary. SBI Fixed Deposits provide you with the security of capital and guaranteed returns. Therefore, investing around 30% of your overall resources in Fixed Deposits makes your portfolio stable.
Reasons explaining why Fixed Deposits earn you greater returns
Fixed deposits have better yields than the savings banks
The present interest rate offered by different banks on savings bank accounts is 2- 6%. Fixed deposit interest rates, though, vary from 3.5 % to 7.75 % based on the investment term.
So, if you don’t use your funds for the next 15 days or more, by saving in a fixed deposit instead, you might reap better returns. Banks now offer higher than regular fds. Some banks are now giving senior citizens higher interest rates.
Cumulative FDs yield much higher returns than traditional FDs. Your principal balance goes up every year as you reinvest your interest. Instead of simple interest, you receive compound interest.
FD interest rates could outweigh the stock returns during a recession
Equity investments would give you better returns than fixed deposits. That may not be the case every time, though. Equities are subject to price volatility, and their underlying essence is such that, from time to time, the Mutual Fund NAVs appear to go up and down. Fixed Deposit interest rates, however, are not influenced by price fluctuations.
Changes in the monetary policy of the state may lead to changes in interest rates. So, the new interest rate applies to the new Fixed Deposits as the RBI cuts the repo rate. It doesn’t change the older FD interest rates.
Earn better interest rates than PPF Accounts and NSC from corporate fixed deposits.
Corporate FD interest rates range from 7 % to 12 % depending on the investing period. Some pay higher interest rates to senior citizens.
However, approximately 7.9 percent interest is provided by PPF (Public Provident Fund) and NSC (National Savings Certificates). You earn better returns than NSC and PPF programmes from certain Corporate Fixed Deposits.
Pick schemes with excellent credit scores as you invest in Corporate Fixed Deposits. You will not be able to sell the Fixed Deposits or reclaim the money if the company fails. Do extensive analysis before investing. There are higher premature withdrawal costs for Corporate Fixed Deposits. Be mindful of your tenure.
Factors impacting FD rates
FD Tenure
The interest on fixed deposits varies broadly based on the tenor selected at the time the transaction is started. Often lenders give strong special-duration FD interest rates.
Investment amount
The interest rate applied to the instrument is also influenced by the overall amount deposited in a fixed deposit.
Renewals
By opting for an auto-renewal facility, borrowers will gain more effective interest rates on fixed deposits. It also reduces the need to keep track of deadlines for renewal. With the FD maturity Calculator, you can review your maturity value at any time.
Investor’s Age
In the calculation of the interest rate applied to a fixed deposit, the investor’s age also plays a part. In contrast to ordinary borrowers, senior citizens typically receive higher interest rates. For instance, SBI Fixed deposits for senior citizens are 50% higher than regular deposits. A separate fixed deposit (FD) scheme for senior citizens in India has been initiated by the State Bank of India known as SBI Wecare Deposit. Under the programme, senior citizens can earn an extra return of 30 basis points on their SBI Fixed deposit on the existing 50 basis points.
Banks in India have been giving senior citizens a higher rate of return on FDs. This has contributed to FDs becoming the country’s chosen investment option for senior citizens.
Market Scenario
The monetary and fiscal policy and the current economic situation in the country have a significant impact on the interest rates applied to fixed deposits.
Conclusion: Fixed Deposits suit all your needs, making them is a must-have for any investor, whether you are looking for security, safety or pure convenience of returns and benefits. Besides, this instrument’s nature means that it can fulfil a particular role for any form of investor. FDs are here to save you, whether you are a high-risk investor, only looking to cap your invested money, or have a lower risk appetite and want a healthy and stable way to gain more returns. Adding an FD to your investment portfolio makes it a smart investment choice.