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Things to consider while investing in Fixed Deposits

Posted August 10, 2017 by Richa Sharma to Investing 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

“Money attracts Money”, the path to being wealthy lies within this motto adopted by several billionaires in our country and across the globe. If read between the lines, this line truly means alot to people who are ambitious and aspire to success as well as wealth. It is not only talent or hard work that makes a person successful, while money can be the accelerator to your wheels of success.

You need to take small steps for a boost before a giant leap. Similarly, you need to take some small steps to attain a successful and peaceful life. It doesn’t matter that you only aspire to be a billionaire, while contentment is what many dream of. When it comes to money, smart investments and intellectual decisions are something that can help you achieve either of your goals.

It is very common that middle-class people try to live contented lives, thinking that a good salary and a permanent job can help them throughout their lives. Somewhat true, but keeping your surplus in a savings account is not a wise decision either. When left with a huge amount of surplus, people think of investing their money with a popular and much-recommended notion of FDs. As they like to minimise risks and keep their money safe in the banks for a better future.

Fixed deposits are no doubt one of the risk-free options in the investment market, wherein you have fixed returns and your money is safer with the financial institutions. Since banks are the only known sources to people, they do not know the consequences they could face while applying for an FD with a bank. The pros and cons of Fixed Deposits need to be examined properly before investing in them.

Pros of Fixed Deposits

Tax Savings: While lenders charge TDS for the interest amount which exceeds INR 10,000 in a year. You can apply for a tax-free interest amount by submitting the 15G or 15H form to the lenders.

Safe Investment: As your money is safe with the lenders, you can still get good returns depending on your Fixed Deposit Interest Rates.
Short Maturity Period: Fixed Deposits are well known for their maturity periods, as you can choose from the period of minimum 1 year or/up to maximum 5 years to keep your money with the lender.

Cons of Fixed Deposits

Fixed Interest Rate: While FD’s are chosen due to the income you get on the interest rate. If the interest rate in the market changes, it will not affect the interest amount that you get.

Penalty on early withdrawal: As the maturity date is decided by the lender and the individual while securing the deposit, it is recommended that withdrawal of the deposited amount should not be withdrawn before the maturity date. As withdrawal of the amount before the maturity date attracts penalty on the deposited amount.

Inflation: While rising inflation increases the price of the commodities, it relatively reduces the purchasing power of the currency. Thus the interest amount of FDs stays unaffected even with the rise or fall in the inflation rates. This might leave you disappointed with the returns that you get from your investments.

Seeing the pros and cons of Fixed Deposits can leave you in delusion, while your alternate source of investment in FDs can be with the Non-Banking Financial Companies (NBFCs). As the NBFCs provide better interest rates and security options as compared to the other money lenders or financial institutions.

About Richa Sharma: Richa is a financial consultant and writer for https://www.bajajfinserv.in/finance/. He helps people to select the right program to settle their debt issues. He also gives advices on problems related to finances.

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