How Fixed Deposits Stand Out Among Different Types of Deposits?

by Aman Khanna Finance

The Fixed Deposit is a highly reliable investment option for all kinds of investors. Irrespective of age, profession, or vocation, Indians have always depended on the fixed deposit with trust and faith. There is a myriad of reasons behind the popularity of Fixed Deposits.

Why FD Is Better Than Other Investments

Different types of investments excel in some of these aspects: higher returns, the safety of capital, and the power of compounding, flexibility, emergency money, or regular income. However, FD is a wonderful investment vehicle that combines all of these aspects in one. Hereby we have evaluated popular investment like Savings Account, PPF, SCSS and Mutual Funds against Fixed Deposit:

Why FD Is Better Than Savings Account

Your Savings accounts give you diverse like Safety of Capital, Flexibility to use your funds in an emergency. However, it provides meager returns. It does not allow your portfolio to grow in the long run. In addition, you cannot get the most out of your money by letting it sit dormant in the savings account.

Instead, if you park your money in Fixed Deposits, it generates more than double the returns as compared to your savings account. Hence, it gives a real power of compounding. Fixed deposits from Bajaj Finance gives you AAA rated safety to protect your capital. You can also choose to open a fixed deposit with monthly interest payouts that will act as a stream of regular income for you.

Why FD Is Better Than PF Account

Your Provident Fund (PF) Account provides the highest level of safety to your investment portfolio. It also gives reasonably better tax-free returns. However, it lacks the flexibility of withdrawals. The rules of PF are kept stringent to avoid frequent withdrawals to generate lifelong corpus. Hence, you cannot rely on PFs for emergencies. The other point is, PF can give you good maturity amount, but it has does not have the features to generate regular income out of your investment.

To give the flexibility to attend an emergency, you should invest in Fixed Deposit, in addition to pf investment. Regular investment in FD will create a large pool of wealth in due time. For example, if you set up a FD of INR 25000 for every three months, after three to five years, you will create a good amount of money that will give you flexibility, safety, and higher returns. When you invest in an FAAA-rated (Crisil) FD by Bajaj Finance, you can attach reasonably good safety to your investment.

Why FD is Better than SCSS and PMVVY

Senior Citizen Saving Scheme (SCSS) and Pradhan Mantri Vay Vandna Yojana (PMVVY) are the most popular investments among senior citizens. They can bring regular income and high reliability to your portfolio. You can generate monthly or quarterly income out of your investment, but it lacks the power of compounding. After a few years, the inflation increases, but the size of your portfolio might stay the same.

To overcome this shortcoming of SCSS and PMVVY, you should invest in Fixed Deposit with a cumulative option. The interest income shall be added to your principal, so at maturity, your portfolio will grow to beat inflation in the coming years. That's why FD is the best Investment Option.

Why FD Is Better Than Mutual Funds

Mutual Funds have a high power of compounding, but only if you have invested in the long term. They are the best alternative for creating a goal-based portfolio. In the short term, market fluctuations can affect the returns of the mutual fund. Therefore, in case you need money for emergencies; and the current market health is adverse, you may have to suffer losses.

To protect the potential of the long-term power of your mutual fund, you must create a separate emergency fund in the form of an FD. It will insulate your mutual fund to allow them to grow. A fixed deposit from Bajaj Finance gives a higher return with strong reliability.