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3 Significant Tips for Investing in Fixed Deposits

Fixed deposit is one of the most popular financial instruments among Indian investors. In fact, these are considered as the risk-free investments because their interest rate does not change according to the market conditions. Also, they promise a decent rate of return. So if you are planning to invest in FDs, here are a few things you need to know before investing in these fixed income options.

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3 Significant Tips for Investing in Fixed Deposits

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  1. 3 Significant Tips for Investing in Fixed Deposits

  2. Fixed deposit is one of the most popular financial instruments among Indian investors. In fact, these are considered as the risk-free investments because their interest rate does not change according to the market conditions. Also, they promise a decent rate of return. So if you are planning to invest in FDs, here are a few things you need to know before investing in these fixed income options.

  3. Take the necessary precautions Before making any investment in fixed deposits, make sure that you are aware of the tenure period and also, the several tax implications that are applicable during the tenure. Tax is deducted from your fixed deposit interest rate which reduces the overall net earnings on your investment. Although, that TDS is applied when your interest income is more than 10,000.

  4. Avoid premature withdrawal Locking up money for the long term and then making a premature withdrawal can result in lower returns. Like for instance, if your bank is offering 9% interest rate on one-year deposit and 9.5% on 5-year deposit, then don’t go for the long term if you may need the money earlier. Because, if you opt for a 5-year deposit and choose to break it after one year, then you will get the rate equivalent to one-year deposit. In addition, you may have to pay a premature withdrawal penalty.

  5. Split the amount of investment In case of fixed deposits, interest rates tend to move in yearly cycles. Therefore, to avoid this, you should try to form a ladder of FDs that have different tenure. For example, if you have an amount of Rs. 4 Lakh, you can split the amount in four deposits with one lakh each for one, two, three or four years. When the first year FD matures, you can reinvest the same in the 4-year FD. Through this, you will be able to balance the interest rates over a long period of time.

  6. On the whole, it is advisable to keep these above mentioned points in mind before starting any investment. Besides, open a fixed deposit account online with Axis Bank and get the best FD interest rates with low minimum deposit.

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