One of the best investment options, fixed deposits are generally a safe choice since the risk involved is minimal at best. If you have an amount of money that you’re looking to invest in, and are wondering whether to buy gold, land, or any other property, you might want to think about FDs. Fixed deposits offer high returns and also are easier to liquidate, compared to other assets.
Before you make an investment in an FD, you need to be aware of the process of a fixed deposit and how you can improve the investment by choosing smart ways of investing the principal. Here are some of the tips you could consider for your investment in FDs.
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Use FD Calculator
Before you invest your principal amount in a fixed deposit, it’s important to calculate fixed deposit interest rate and choose the best scheme. Banks and other financial institutions offer varying rates of interest along with unique schemes for fixed deposits. Make sure you do your research and identify the best plan out there for your requirements. You can use an online fd investment calculator. Just enter the principal amount and tenure period, and get the interest rates instantly.
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Split Your Investments
Some financial institutions offer insurance of up to Rs. 1 lakh on your FD amount. If you think this isn’t enough for the grand principal amount you are looking to invest, you can always split the lump sum and invest in multiple FDs and get an insurance of up to Rs. 1 lakh on each of these investments. This gives you a lot of leverage for your investing.
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Balance Multiple FDs
When you invest a lump sum in an FD, you run the risk of locking in the amount for a long tenure period with a low rate of interest. A smart investment option would be to ladder the amount through several fixed deposits with smaller principals. For instance, if you’re looking to invest an amount of Rs. 4 lakh into an FD, you could invest the amount into four different accounts with varying maturity periods of one, two, three, and four years. As each FD matures, you could invest the returns and the principal into the longer termed FD, and boost your overall ROI.
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Choose Suitable Term
Early withdrawal of the fixed deposit can cost you quite a bit. Even though the principal amount remains unaffected, you might not get the promised interest rate. Additionally, there could be a heavy penalty with the withdrawal. Most banks offer higher rates of interest for a longer term. Though this might seem like a great plan in the long run, you also need to consider situations of a financial emergency. When you split your FDs, if you break even one of them during a cash crunch, the penalty will comparatively be low.
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Keep a Check on Taxes
When you file tax returns, you can mention the income through fixed deposits, which makes you entitled to a tax deduction. Make sure you are aware of tax policies before investing in a fixed deposit to avoid losing out on a high return of investment.
Fixed deposits can be great ways of securing your financial future. There are several ways that require minimal effort but ensure your fixed deposit incomes earn high returns. Think of smart ways to invest in the fixed deposit and gain high returns. After all, it’s your financial future. Who better to secure it than yourself.
