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Why FD Works For The Long Term?

Posted November 25, 2017 by Aman Khanna 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.

When deciding upon a FD investment, the major question that runs in an investor’s mind is whether he should opt for a short-term investment or a long-term investment. Basically, how long does he/she wants the fixed deposit tenure to be? The answer to this question lies in a person’s approach. Personal preference plays a pivotal part wherein everything from your saving habits to alternative investment options come into consideration. However, one thing is clear that you have to invest your hard-earned surplus money in an assured investment avenue.

In a fixed deposit investment, there is a short-term FD and a long-term FD. Collectively both are known as a term deposit. A term deposit is nothing but an investment which is made for a fixed term on a fixed rate. Herein, you invest your money for a particular amount of time which is predetermined. Not only the tenure but even the rate of interest is pre-determined in a fixed deposit. The low-risk investment strategy is a good way to make the most out of the surplus amount you have. It helps you to lock your money which otherwise would be spent unnecessarily.

What is a long-term fixed deposit and how is it beneficial?

Fixed deposit comes with a tenure ranging between 1 to 5 years. If you opt for a tenure for more than 3 years, you are involved in a long-term fixed deposit investment. Long-term investment helps your money to be safeguarded for a longer period, and it helps you earn sizeable returns on your investment.

Higher Interest Rates: Long-term fixed deposits come with a higher interest rate. One of the key reasons why people invest in the fixed deposit is because of sizeable returns. When you compare the returns between the small tenure and a long one, a long-term fixed deposit helps to earn a higher return.

Savings: If you have a bad spending habit and you tend to spend your funds unnecessarily. A fixed deposit investment will help you to lock your funds for a period of up to 5 years. There are financial institutions which even offer a tenure of up to 10 years.

Flexible options: Owing to the NBFCs flexibility, the fixed deposit product that they offer is much more flexible than what the traditional lenders offer. You can select the payment and interest accumulation based on your preference maturity – monthly, half-yearly or annually. NBFCs such as Bajaj Finance even offer services such as flexi deposit which makes borrowing your investment quite flexible.

Building Trust: A long-term investment with a financial institution is not just the matter of finance but a long lasting relationship as well. When you commit your investment for a long-term, the financial institution considers your case before everyone else. There is mutual trust among the parties, and at the time when you need them to provide financial assistance, they tend to favour you. All of this can be credited to a smooth relationship between the financial institution and the investor.
Schemes: It is not just the government schemes that are favourable but schemes run by NBFCs and other new age institutions as well. NBFC such as Bajaj Finance offers Senior Citizen FD wherein senior citizen get an added interest rate of 0.5%.

The points above are the benefits that you avail when you invest in a long-term fixed deposit. To make the most out of the long-term fixed deposit investment, it is important that you study all the factors related to the Interest rates on Senior Citizen Fixed Deposit in detail. 

About Aman Khanna: Aman is working in the domain of Investment management in one of the top universities. He has published research papers and case studies in Investment marketplace. He is an avid blogger in the domain of Investment management. you can also find him on social networking platforms

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