Secure Investments: Advantages Of A Fixed Deposit

By Author: Shilpika Ponnappa
Total Articles: 428
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Nowadays, investing can be quite risky. However, there are some strategies that you can do in order to make your investments safer. Let us first recognize these so called safe investments.

Of the many safe investment options available nowadays, a fixed deposit is the most popular. With this form of investment, you can deposit a lump sum for a fixed time period that could range from a few weeks to years. Then you can earn a predetermined interest. This is offered by banks as well as other financial companies. The latter one poses more risks compared to putting the money to the bank.

Advantages
- The fixed deposits offered by most reputable banks are deemed safe since these banks are regulated by India's Reserve Bank. Which is the banking regulator of India. To exemplify the risks on a company FD, if the company happens to go bankrupt, the chances of you losing your money are very high. If you really wish to go the riskier way, you need to check their credit standing and see to it that they are stable in the industry.

- With this option, you can receive regular income which will come from the interest ...
... that is applied to your deposit every month or every 3 months. However, looking at the benefits that are offered in Stock markets, this is a lot lower. In stock market investments, the portfolio can rise up to 30% but the FD will normally earn up to 10% only.

- With this option, you do not have any protection from inflation. If, during the maturity of your FD, the inflation rate became steep, the adjustment will tend to fall.

The interest
Fixed deposit interest rates can differ depending on the maturity. For longer deposits, you can expect higher rates. Depending on what the investor wants, the money can be received by monthly payments or quarterly payments. The earnings may seem quite small but they are actually very good since you are only investing the money yet it is growing since you chose to make it an active investment like the FD.

What if you break your deposit?
In case, you need to withdraw the money before the maturity date, there are some costs applicable.

Alternative options
If you want higher returns of interest, stocks and mutual funds seem to be good options. However, these are high risk investments. When looking for equally low risk options, one can opt for a fixed maturity plan and they tend to be similar in advantages and pay outs. However, there are no guarantees of returns with this one.

Shilpika Ponnappa,
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