India has always been seen as a country that values saving. Risk-averse investors have always preferred to invest in fixed-income products like fixed deposits, which offer the security of guaranteed returns. However, the majority of new-generation investors choose to invest exclusively in market-linked products like mutual funds.
They do it because of the declining bank rates and an increased understanding that stocks are a better option for long-term investing. While this is a wise decision, it doesn’t follow that fixed deposits can’t or shouldn’t be included in your portfolio. You can get the highest FD interest rates 2023 if you choose financial institutions like Bajaj Finserv.
FDs can be a beneficial instrument for diversifying your investment portfolio, particularly in times of market turbulence, rising inflation, geopolitical unrest, and economic slowdowns. They give consistent returns while protecting your wealth, reducing the risk brought on by market swings. This method not only protects your money in a risk-free setting, but it also enables you to earn a guaranteed higher interest rate. Thus, it generates better returns than savings accounts. Additionally, investing in tax-saver fixed deposits can help you meet your short- and long-term goals while offering tax advantages. Before investing in an FD, it is essential to thoroughly investigate your options because interest rates between financial institutions differ. You must find out which financial institution provides the highest FD interest rates 2023.
Benefits of fixed deposits for long-term financial planning:
- Savings accounts provide a lower interest rate than investments in fixed deposits. Therefore, investing it in an FD is recommended if you have a large sum of money in your savings account. You can invest the money if you don’t intend to utilise it in the following years. A higher interest rate is imposed on senior citizens.
- The principal amount in a Tax Saver FD is tax-free in accordance with Section 80C of the Income Tax Act of 1961. FDs are an excellent option for salaried people and business owners to reduce their tax burden. The FD must be held for at least five years to be eligible for tax exemption. Additionally, the maximum deposit amount for tax exemption is Rs. 1.5 lakh.
- Investments in fixed deposits are risk-free, and up to Rs. 5,00,000 are insured by the RBI, as you may already be aware. Additionally, the financial institution is legally required to pay you interest at a fixed rate regardless of the state of the market. Your FD investment doesn’t lose money during a market downturn, unlike stock market investments.
- Your financial objectives, both short and long-term, can be met with FD investments. You will know exactly how much you will receive at the conclusion of the investment duration. This is because your interest earnings are assured regardless of the state of the market. This enables you to clearly define your financial objectives for the future, such as saving money for a down payment on a house.
- The flexibility of fixed deposit investments’ terms, which can range from one week to 10 years, also aids in financial planning. This means that you can choose your FD investment tenure based on your capacity and goals. Additionally, higher interest rates are typically associated with longer tenures and types of FD.
- You can avoid using your money for frivolous purchases by locking it away in a fixed deposit for a set amount of time. As opposed to leaving your money in a savings account, this enables it to increase and generate higher interest.
- A fixed deposit may be withdrawn before the conclusion of the lock-in term. FD investments give you quick access to your money in the event of an emergency. Financial situations, such as an unanticipated hospital stay, can be significantly helped by a partial withdrawal facility. There is, however, a minimal fee associated with money withdrawals.
- Investments in fixed deposit products also enable overdrafts of up to 90% of the principal. You can even have a premium credit card issued against your fixed deposit.
- Additionally, both the pay-out intervals and interest rates on FD investments are adjustable. Interest can be paid at several intervals depending on the period you select. Additionally, longer tenures have higher interest rates than shorter ones.
- You can move your FD assets from one branch to another within the same financial institution.
- Finally, there is no need to visit the financial institution physically because FDs can also be renewed automatically using Internet banking.
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These benefits of fixed deposit can help you maximize your savings.
