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Why FD is Safest Investment Option?

Why FD is Safest Investment Option?

Investing or saving, we know they come in handy when planning for a financial future. Just say your dad just retired, and he has no clue what he is going to do with all the money he had saved in his accounts through salary all these working years. What would you do to help him out? We know he only needs it a few years from now, and that doesn’t mean you would go put all of that money into buying a new car or traveling the world. Just as he secured your tomorrow’s, you would try to secure his.

Although, he doesn’t have the expertise to manage it if you put it into stocks, and real estate is hard to liquidate. What do you think would be the best option? It would always be a fixed deposit. Now, this is where the money is safe, does not require managing, and the returns are pretty impressive. That’s how much you can trust an FD. Now, we aren’t hyping this investment method. You can find out for yourself.

What Makes an FD the Safest Option to Invest With?

There are not one or two reasons why we say that FDs are the safest options you could choose; why not understand them a little more in-depth? So, here we go.

It is not linked to the market – This is one of the very first answers that you will need to consider when it comes to FDs. No kind of market fluctuations would ever affect your fixed deposit investment. Whether the market is up or down, you will always get the returns that were said to you. For instance, if you had invested in Kotak Bank’s FD, and suddenly the Kotak shares have dropped, that does not mean your FD returns would also drop. If you had used the Kotak Bank FD Calculator and found out that the returns would be 25,000 rupees, that will be assured until maturity.

Senior Citizens have a Benefit – All banks today, as of 2022, offer their senior citizen customers a 0.5% or higher interest rate than what they offer to their general customers. This option gives the senior citizens an edge over the others. As already stated in the beginning, it is comparatively harder for a senior citizen to manage investments that require a lot of attention and focus, but the fixed deposit is a safety box that guarantees a percentage of return. Therefore, this could be one of the best choices for a senior citizen to lock up money for a fixed period of time.

It is fixed – Well, this is one of the reasons why you need to be happy. Yes, your money will be tied in here for a fixed period of time, but that is a good thing. This means you will not be withdrawing the money from the account unless it is really needed. When you keep money in your account when you see something, or like something, out of the shopping spur, you will want to withdraw the money and buy it away, even when it isn’t really necessary. But, if you have it locked away in your FD, you will withdraw it only when you need it.

It is easily liquidated when you really need it – This might contradict the previous point, but it is true. An FD is liquid when you want it to be liquid. This means that if you have a sudden requirement but do not have an emergency fund, then this option is a great way for you to stay debt-free. You can break off the FD in time of need, and you will be charged a penalty, but the penalty will be small and something you can easily afford to pay off through the returns. Moreover, you would not be losing a lot when compared to taking out loans and paying the principal with interest.

You get to be stress-free – Well, if you are someone who has a hard time trying to put things together and keep an eye on your finances, then this is one of the best options. The financial institution that has your FD will always take full responsibility for it. This means you can be care-free at all times until the date of maturity.

You have the benefits of taking out loans – When you require money, and it’s a need, you do not always have to break the FD. That’s great news, right? If the amount you need is less than 90% of the FD you already have, you can use the FD as collateral to get a loan of up to 90% of the value. In this way, you will have money for your emergency, and you will also have your FD with all the returns. But, there is one thing you would have to remember, you would have to pay off the loan you take in order to claim your FD at maturity.

You can make use of tax benefits – Now, you might have heard of tax-saving investments. FDs, too, could be considered something similar to that. Also, when you earn returns that are less than Rs. 10,000, you will not even be charged any taxes.

You can always continue – FDs are not like shares, mutual funds, or other schemes. If you feel like you would not need the money right at maturity, you can extend your FD for the current rate for another few years.

It can be flexible – FDs are one of the best investments that are flexible. They could be either long-term, short term or also somewhere in the middle. This is because they range from 6 months all the way to 10 years.

Final Thoughts

Now you would mostly know why Fixed deposits are known to be one of the safest investments of all time. These perks that are mentioned above are a great way to lock in your surplus money for however long you want. It is also an element that needs to be present in your investment portfolio.

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