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A fixed deposit earns you interest at a particular rate, which is decided at the time of investment.
Fixed deposits are a safe investment option. (Representative Image)
Fixed deposits (FDs) are among the safest options for investing your money. They are known for their security and predictable returns. FDs are ideal for conservative investors who don’t want to take any risks with their investments. Here’s everything you need to know about fixed deposits.
What Is A Fixed Deposit?
A fixed deposit is an investment option offered by banks. Here, a lump sum amount is invested for a specific period. Thus, the tenure and interest rates are determined at the time of investing. Investors can choose to receive the interest at different frequencies, such as monthly, quarterly, half-yearly or annually.
How Does A Fixed Deposit Work?
Banks utilise the amount investors put in a fixed deposit to provide loans. The interest paid by borrowers exceeds the interest paid by the bank to FD holders. This allows the bank to generate revenue from fixed deposits.
As the tenure for the FD expires, a depositor can withdraw the amount or renew their investment. It is important to note that banks offer different interest rates for investments of different tenures.
Advantages Of Fixed Deposits
Guaranteed Returns: Investments in fixed deposits are not affected by market risks. Thus, you already know how much you will earn from your investment at the time of making the deposit.
Better Returns Than A Savings Account: The returns generated by fixed deposits beat those offered by a savings account.
Special Interest Rates For Senior Citizens: Banks offer higher interest rates for FDs to senior citizens compared to normal FDs.
Flexibility On Tenure: At the time of opening an FD, you can select the tenure for the deposit at your convenience.
Liquidity: Though FDs come with a lock-in period, you can take loans against FD or make a premature withdrawal if you urgently require money.
How To Invest In A Fixed Deposit?
You can follow the following steps to invest in an FD:
Go to the website of the bank where you want to open the FD account.
Browse through the different FD options and decide which suits you the most.
Enter the required information for opening the FD account.
Submit documents as per the requirements.
Finish the verification procedure.
It is also possible to visit your nearest bank branch to open a fixed deposit.
To conclude, opening an FD gives you a reliable income option. It is an excellent way to diversify your investment portfolio. It is best to compare the interest rates offered by different banks to check where you can get the highest returns.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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Delhi, India, India
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