Any individual would agree that saving money in today’s time has become pretty difficult. Even if individual wishes to do so, there are several expenses that would turn up which result in savings getting spent. Most of the time we end up spending on things which were not even necessary and then regret later. Here is where a fixed deposit investment is most favorable. As a saving instrument, fixed deposits help you to keep your bulk amount intact and prevent you from spending it unless you are in a dire need of cash.
When we talk about investment in the fixed deposit, there are three things which an investor should generally consider: The amount that he is depositing, as the higher amount will yield him higher returns through the interest. The tenure for which he is depositing, a long-term is suggested for a steady income, and the rate of interest that is being offered by the financial institution, currently at 7-8.5%.
However, there are several questions that pop into an investors’ mind when he looks forward to investing in a fixed deposit. It is essential for him to know that there are various online tools such as fixed deposit calculators which can help you to determine the exact amount that you will earn over a particular period of time if you invest in fixed deposit with a particular Non-Banking Financial Company (NBFC) or a bank.
The income that you earn from investing in a fixed deposit largely depends upon three factors as mentioned above: Amount, Tenure and Rate of Interest.
If the amount is higher than INR 1 lakh then it is expected to get a higher rate of interest. The majority of the financial institutions offer 0.5% difference in the rate of interest. However, there are certain financial institutions which keep the percentage similar regardless of the amount. The amount that you deposited helps the financial institution, so there will be no doubt that you would be rewarded for the same.
The tenure is of prime importance. Most Non-Banking Financial Companies (NBFCs) offer the fixed deposit for a period of 1-5 years. Thus, one can opt for either a short-term tenure or a long-term tenure. A short-term tenure is advisable if you want to try other options. However, for steady and better returns, it is advisable that you opt for a long-term fd.
The rate of interest offered by the financial institutions differ from one another, thus, it is essential that you evaluate the rate of interest before you choose the financial institution. If the rate of interest provided is higher, it will automatically help you earn better returns. And the returns can be affected according to your interest rate. Apart from these, there are several points that you must consider to maximise the profit on your investment.
Diverse investments: It is important that as an investor you should spread your investments across the different financial institutions. You do not want to risk your investment by locking it for a longer period of time at a low-interest rate. There are various options that are available, you can opt for Non-Banking Financial Companies which are offering a better rate of interest on FD than other financial institutions.
Avoid premature withdrawal: Fixed Deposits are all about letting your investment mature. And if the very purpose of the investment is not served then there have to be certain drawbacks for both – the financial institution and the investor. A financial institution would lose funds without being prepared for it, and thus, the investor will have to pay for it, this comes in the form of premature penalty which reduces the returns on investment.