Fixed Deposits: All You Need To Know

by Shashank Bhaskar Finance Adviser

When an individual earns surplus funds, it is always feasible to find different ways to maintain them and use it to generate more income through it. One of the instruments that financial institutes and banks have designed is a fixed deposit. It is an investment instrument that helps a customer earn profits depending on the funds they have invested.

With an FD, a customer can deposit a large sum of money for a specified PERIOD, which may be different for different banks. Once the funds are invested with a reliable bank, it will start earning interest based on the duration of the deposit. The one feature that makes FDs different from a savings account is the owner of the former cannot make any withdrawals from the deposit until the time of maturity. But in a case of emergency, they may withdraw them after paying the penalty. As fixed deposits have flexible tenures, it provides the owners of the deposit to manage multiple FDs which are spread across various mandates. With this, an individual can earn more through their investments. Some banks also allow quickly fixed deposit openings even if they do not have an account with the bank.

Some of the features are:

An FD account enables the investors to earn decent interest on the surplus funds.

Even if liquidity is less, an individual can check for high-interest rates which are the case with most of the fixed deposits.

The tax gets deducted at source from the interest.

Funds get deposited in the account only once, but if a customer wishes to deposit more, they need to create another account.

A fixed deposit can be easily renewed.

A fixed deposit can be quite advantageous for a customer. They are beneficial for individuals who are looking for safe investment opportunities.

Some of the advantages are:

An FD provides financial stability and is considered a safe investment instrument.

Customers can opt for periodic interest payouts. They also help a customer manage their monthly expenses.

The FD owner can easily benefit from high-interest rates which are offered by the company deposits.

The returns earned on a fixed deposit are assured, and there is no risk of loss of principal involved.

Even if there are market fluctuations, the account remains unaffected. These give the assurance to the owner that their investments will not result in loss.

A lot of financial institutions also offer senior citizens good returns.