Fixed Deposit or FD, had been quite a popular investment choice amongst Indians due to their confident returns and protection. They tend to provide a dependable manner to preserve capital, making them a desired desire for traders who are not inclined to take any risk with their money.
Beyond their assurance of return, they are strategically used as tools for wealth-building. In this article, we’ll explore how to optimize such financial instruments for wealth creation.
What is a fixed deposit? How does it work?
As the name implies, it is a funding instrument wherein a capable investor deposits an amount of cash for a hard and fast tenure. For locking those budgets for a positive period, fixed deposits pay the depositor a fixed price.
Furthermore, when the investment matures, the investor receives the invested principal sum with maturity interest.
Here, two parties are concerned: One is the bank, and the alternative is the client. Supposedly, if you have some spare cash and need to put money into fixed deposits, there are tons of options available.
You can deposit money for periods starting from some days to even years, and the rate of interest charged by banks varies, so it is really helpful to examine first.
(Tip: Use a fd calculator before investing your hard-earned money.)
- Investment: Deposit a lump sum amount for a particular period.
- Rate of interest: The institution pays you interest on your deposit at a predetermined rate.
- Tenure: The tenure of the FD is fixed at the time of investment. You cannot withdraw before maturity, so choose carefully.
- Assured returns: FDs offer a guaranteed return, making them a safe investment.
- Interest payment: Depending on your choice, the interest can be paid out in a periodic manner.
- Taxation: Interest amount earned on FDs is generally taxable as per the income tax slab.
How you use the best fd as a Wealth-Building Tool
- Tax-saving FDs
Some fixed deposits qualify for tax deductions under section 80C of the Income Tax Act (India). Investors can use these to save on taxes while earning interest.
- Reinvest interest
Opt for cumulative FDs, where the interest is compounded periodically and paid at maturity. This tends to maximize returns through compounding.
- Diversification
While FDs are low risk, diversifying your investments across different asset classes. These are stocks, mutual funds, etc., as they can enhance overall returns and reduce risk.
- Stay updated
It is very essential to keep a keen eye on interest rate trends and economic policies that could affect FD rates. Apart from this, also you need to be aware of any updated rules and regulations of your bank.
Best app to invest in the best fd in 2024
One of the best platforms in 2024 is Bajaj Finserv. Nowadays, investing in such financial instruments is as easy as ordering groceries from your smartphone.
Around three and a half months ago, when I started planning to make investments, every one of my associates advised me to go for this Bajaj Finserv app. Believe me, it is super convenient to use and here is a step-by-step guide:
- Download the app from the Play Store/App Store
- Sign up by entering your mobile number
- On the home page, you’ll see the Investment Bazaar section
- Tap on Fixed Deposit
- Proceed further as per your objective
Conclusion
If you don’t have the capacity to take risks, then a fixed deposit is one of the best investments you can initiate. Remember that returns on fixed deposits are lower than other investment avenues like equity, but the risks, too, are lower.
