Evaluating and drawing up a financial plan to meet all your long-term goals is essential in today’s world. There are various areas where you can invest your savings to get maximum returns. However, one of the most common and safest options is to invest in fixed deposits. This is because fixed deposits offer numerous benefits. These include flexibility, tax advantages, guaranteed returns, and acts as a source of hassle-free investment.
There are various factors to look for while investing in fixed deposits. These include rate of interest, repayment tenures, and withdrawals. So, let’s get you started on a quick guide to choosing the best FD Schemes for your savings.
What are the Factors You Must Keep in Mind While Investing in Fixed Deposits?
Below is a list of factors that influence returns on fixed deposits.
- Tenure
You must continually invest in fixed deposits for a long duration. The period for which you invest in fixed deposits is directly linked to the returns you receive.
- Background of the Lender
Before investing in a fixed deposit of a financial institution, it is essential to know its credibility. These can be determined by evaluating the credit rating of the financial institution. These ratings are provided by many institutions such as CRISIL and ICRA.
- Interest Rates
FD Interest rates offered by one financial institution differ from another. While investing in fixed deposits, you can opt for either of the two interest rates- cumulative or non-cumulative interest rates. While investing in cumulative interest rates, the principal amount with interest is to be paid at the end of the repayment or maturity period. While investing in non-cumulative interest rates, the interest amount is paid in different intervals. These intervals depend on the FD plan that you choose.
- Prevailing Economic Conditions
The demand and supply conditions of an economy are also important factors affecting fixed deposits schemes. In the case of a tight liquidity scenario, banks have to utilize their deposits to meet their financial needs.
- Renewal Facility
Many banks provide auto-renewal facilities for the amount invested on fixed deposits. This facility helps investors earn higher rates of interest. Moreover, investors do not need to keep track of renewal dates.
- Age
Age is another factor affecting investment in fixed deposits. For instance, senior citizens are eligible to earn higher rates of interest.
- Principal Amount
Financial institutions offer different interest rates on the different amounts invested. The higher amount you invest in fixed deposits, the higher is your return.
Conclusion
Financial backup has become a necessity in today’s demanding lifestyle. You must select the FD scheme which gives you the highest interest rate for a longer tenure to maximize returns from your savings. To meet this requirement, you should invest in not just one segment but multiple areas such as fixed deposits, mutual funds, and real estate. A combination of such investment options will help you reduce the risks and increase your profits.
Having a financial plan in place will also help you to evaluate and compare such combinations properly. You must select the FD scheme which gives you the highest interest rate for a longer tenure to maximize returns from your savings.