4 Good Reasons To Include FD In Your Financial Strategy

A Fixed Deposit (FD) should always be your first preference while planning investments. Identifying the financial instruments that meet the financial goals is a challenging part of financial strategy. Many financial instrument options are available to you. But an FD is a convenient option because interest rates on Fixed Deposits remain the same.

Here are four reasons why opening an FD account is a common advice from most financial experts.

#1 Risk-Adjustment

When compared to other financial instruments, Fixed Deposits are among the safest forms of all. The FD corpus you set up is an excellent strategy to guarantee the safety of your wealth because they have low volatility. And those who are just starting with different investment possibilities should invest their money in an FD account to balance their risks and earn a guaranteed return at maturity.

#2 Security

The ratings issued by agencies like CRISIL can be used to evaluate the safety of the funds. The highest grade for financial instruments is FAAA (F Triple-A), which denotes substantial payment of interest and principal. Investing in an FD product with CRISIL ratings of "FAAA" with one of the highest FD interest rates is the best way to balance savings and earnings returns.

#3 Return Rate

Returns are one of the primary factors that most people focus on when it comes to Fixed Deposits. But because of recent market changes, interest rates have been climbing, giving a fantastic opportunity to invest in an FD. Also, choosing the appropriate FD product will ensure the FD returns maximise. 

#4 Compounding Rate

With the power of compounding you can begin investing early on and increase wealth over time. Compounding causes a small sum to grow larger when the principal amount of a fixed term deposit is between six and ten years. 

A cumulative Fixed Deposit is advantageous for people who do not require a regular interest payment because the interest is paid along with the principal at maturity. Therefore, cumulative Fixed Deposit plans or compounding are referred to as money multiplier plans.

Investment Advice

A Fixed Deposit account's ability to accumulate interest is greatly influenced by the interest rate and the date the account was opened. To obtain the best return from your FD investments, use a Fixed Deposit ladder.

Let's start by defining what an FD ladder is. Instead of booking a single large FD for a lengthy term, you need to divide the investment amount into several smaller FDs. This is your first step in creating an FD ladder. 

For example, you have Rs. 3 Lakh on hand, divide it into 3 FDs of Rs. 1 Lakh each. Open the first FD for 1 year, the second one for 2 years, and the third one for 3 years.

You may also like to check - rbl bank fd interest rate

As opposed to depositing your money in one FD investment for a period of 2 to 3 years (which is considered the peak interest tenor), you end up putting the entire sum in three Fixed Deposits with one-year maturities. This builds a ladder for you with which you can meet both short and long term goals.

Ending Note

FDs meet all your needs, whether you're searching for security, certainty, or just plain comfort in returns and perks. And an FD investment is suitable for all types of investors. FDs are here to your aid, whether you are a high-risk investor wishing to simply cap your invested cash or have a lesser risk appetite and want a secure and safe approach to generate higher profits.

Open an FD account to start your saving journey right away.

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