India always has been a savers' country. And risk-averse investors have preferred to put their money on fixed income instruments for decades, such as fixed deposit, which offer the security of assured returns.
However, most new-generation investors tend to invest only in market-linked products such as Mutual Funds due to falling bank rates and rising awareness of equities being a better choice for long-term investment.
Fixed Deposits might be an excellent addition to your portfolio, and here are all the reasons why you should open one either offline or through your mobile banking app.
- Asset allocation is the secret to wealth creation. Different asset classes play various roles in a portfolio, including equity, fixed income securities, gold, etc. So, while Mutual Funds give your money the long-term growth potential of equities, fixed income products such as Fixed Deposits offer stability as their returns are assured. A portfolio with the proper diversification across asset classes ensures that the sway in your returns is minimum, and you have a stress-free investment experience.
- At maturity, a fixed deposit account promises you a limited return. If there is a financial target that cannot wait and need a certain sum of money within a certain period to achieve it, fixed deposits are perfect for such investments. For instance, let us assume that you need Rs 2 lakh for your kid's school admission two years down the line.
Here you know exactly what amount and the exact tenure you will like. Now when depositing the money, you get to know about the return sum at maturity in the FD account.
- Short-term targets are objectives that need to be accomplished within one to three years. The goal here is to conserve capital and gain a small amount of return at the same time. So, for specific investment purposes, fixed deposits are a reasonable choice. Say, in the next year, you want to go on a holiday or at the end of the year you want to give yourself an expensive device, and fixed deposits are a right choice for such goals. You already know how much the trip or the device will cost, and you can invest at the interest rate accordingly.
You are already aware of what amount of money you will get from the FD when it matures while you invest your money in a fixed deposit scheme. You get the returns as decided at the time of booking, no matter how the economy performs or how interest rates move. It helps the budget schedule well, as there are no surprises about the money that will come in and when.