Is having Fixed deposits a sign of a healthy investment Portfolio?
A fixed deposit, also known as an FD, is an investment instrument offered by banks, as well as non-banking financial companies (NBFC), to their customers for varied rates of interest. One can invest an amount of their choice at a predetermined rate of interest for a fixed period of time. The customer then receives a lump sum amount that includes the interest + the principal amount making Fixed Deposits a good money-saving option. visit here
Reasons to Include Fixed Deposit in your Investment Portfolio
The majority of investments are designed to meet our needs, wants, and goals, but there are a few financial instruments that are necessary for every portfolio. And one such option is a Fixed Deposit like Normal Fixed Deposit, Flexi Fixed Deposit, Senior Citizen Fixed Deposit, NRO Fixed Deposit, Tax Saving Fixed Deposit, Children’s Fixed Deposit, etc. So whether you have been a long-time investor in Fixed Deposits or are considering investing in one, here are some reasons why having a Fixed Deposit is a sign of a healthy investment portfolio:
- Safe investment
Different assets play different roles in the investment portfolio. While equities, stocks, and mutual funds may get affected by the market fluctuations, a Fixed Deposit is considered to be a very safe bet as it brings guaranteed returns and stability to the investor’s portfolio. Investors can put in a limited amount of money and be assured of the returns, unlike other investments.
- Flexible Tenures
A Fixed Deposit has a minimum tenor of 6 months that can go up to 10 years of time. This time period ensures that an investor gains maximum returns on their investment over a fixed period of time. Therefore, by looking up at the tenure and rate of interest to be earned on a Fixed Deposit, you can know the exact amount that can be earned after the fixed tenure.
- Loan Against FD
To those who hold fixed deposit accounts, most banks offer a credit facility in the form of a loan or overdraft. In this facility, you can borrow funds at an affordable rate of interest without closing your Fixed Deposit prematurely if you need money immediately. When in need, an investor can borrow as much as 90% of their Fixed Deposit amount.
In case of a financial crunch, a Fixed Deposit allows for easy withdrawal of funds even before the end of the tenure. It is quite simple to withdraw funds prematurely though the investor may have to pay a small penalty for it. But, this facility definitely helps an investor to get urgent funds in times of emergency.
- Short term goals
A fixed deposit is considered to be the best investment option if you want to achieve your short-term goals. A short-term goal is one that you may want to achieve in one to three years of your investment. It is the main objective of these goals to preserve the principal amount and, at the same time, earn some interest. For instance, short-term goals can be like a family vacation you may want to take in the next year or two or purchase an electronic item for your house in a year. Investing in a Fixed Deposit can fulfil these short-term goals as you can accordingly invest and know the expected returns at the time of investment.
- Interest Payout Options
With an FD, you also get to choose interest payout frequency. You can choose to receive interest on an annual, quarterly or monthly basis, you can choose whatever suits your needs the best. For example, if you invest 1 lakh in an FD, you can easily keep track of
monthly interest for 1 lakh fixed deposit.
From the above-mentioned features and reasons to invest, it is very clear that investing in a Fixed Deposit is a very lucrative and healthy option to stabilise and further grow your investment portfolio.