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What is a Fixed Deposit Plan & What are the Benefits of Including it in your Investment Plan

dateKnowledge Centre Team dateJune 24 2021 views192 Views
Fixed Deposit and its Benefits | Buy the Best Savings Plan in India

India has eternally been recognized as the land of savers. It is that time of the year when people take a look at their finances, review their savings, restructure their investments, and evaluate carefully concerning the steps in which they can diversify, expand, and manage their investment portfolio.

While investment options are essentially customized as per the requirements, needs, and purposes of the investors, certain financial instruments are vital for every investment portfolio. One such investment plan is a Fixed Deposit (FD) given its amazing long-term benefits. Know how fixed deposits can help you develop a great investment plan.

What is a Fixed Deposit?

Even though fixed deposits as an investment option are questioned, it persists as one of the most intelligent decisions required to be on your investment list, even if you are a long-standing investor. A fixed deposit (FD) is an instrument for financial investment granted by Non-Banking Financial Corporations (NBFC) and banks. Investors can invest their funds and receive a higher interest rate than what you receive in a regular savings account.

It is one of the most fancied saving plan options that enable you to deposit your funds in a lump sum and further grow your investment savings with utmost security. Fixed deposits allow you to choose the sum that you wish to deposit along with the interest rate and tenure for which you wish to deposit these funds.

When you place your funds to engage in fixed deposits, you fundamentally secure the sum for a set duration. You can choose to receive the interest on the principal amount either throughout the duration periodically or get a cumulative sum at the end of the fixed deposit duration. The interest earned on the Fixed Deposits gets appended to the principal sum after each particular period.

Apart from this, as the tenures of FDs are flexible, you hold the alternative to handle several FD accounts at the very time disseminated across varying durations. In this way, you will be capable of gaining more on your investments.

4 Advantages of Including FD in an Investment Plan

Fixed deposits are among the most protected investment alternatives, particularly when you contrast them with stocks, equities, or any different market-linked investment instruments. With low to moderate volatility, the corpus you put aside by investing in FDs acts as an excellent way to assure that your funds are protected.

If you have just begun investing and venturing diverse investment options, then investing the very sum as your capital is an effortless way to diminish your risks and obtain a guaranteed sum at maturity. When it comes to investing in Fixed Deposits, return on investments is one of the principal aspects that numerous individuals concentrate on.

However, with the contemporary market advancements, the interest rates on the fixed deposits have been growing, making now a transcendent term to invest in a fixed deposit. In addition to this, the best FD product will always assist you in acquiring more out of your investment. Listed hereunder are some of the advantages of including Fixed Deposit (FD) in your investment plan.

1. Assured return on investment

The significant reason why countless people favor investing their money in a fixed deposit is the guaranteed return on investments. Once you invest your capital in an FD (Fixed Deposit) account, you can be assured of getting the returns with a fixed rate of interest.

Banks and financial institutions regularly issue the fixed deposit rate of interest on their portal and in the branches of banks and financial institutions that makes it effortless for clients to determine how much return they will receive.

In addition to this, Banks and financial institutions further hold an FD interest calculator on their portals. A client can determine the interest he/she will draw on investing a particular amount of money for a specific period.

2. Flexible term

The term of investing in fixed deposit (FD) is resilient, and it entirely depends on the deposit holder to fix the term of their deposits. While every bank and financial institution holds its own minimum term rules, the deposit holder can exercise the ultimate decision. It is additionally conceivable to determine whether to extend the Fixed Deposit for the same term and redeem the fixed deposit.

Read how and where to invest for good long-term returns?

3. Easy loans

An FD is a great financial instrument that you can keep aside for meeting your financial emergencies. Apart from this, you can easily take a loan against your fixed deposit. You can obtain a loan of up to 95 percent of your accumulated FD amount that can vary from bank to bank. This ease of receiving loans is what makes it the most dependable investment option.

4. Tax advantages

The Fixed Deposit interest or return you receive from your FD investments is exempted up to Rs 10,000 in one financial year. Apart from this, certain tax-saving fixed deposits hold a lock-in period of 5 years and are exempted under section 80C of the Indian Income Tax Act, 1961. with up to relief of Rs. 1.5 lakhs.

It can be concluded that investing in FD is one of the most rational decisions you can take to grow your savings and save your funds from market fluctuations. However, there might be a chance of loss of principal amount if you do not pick the accurate issuer.

If you are not sure of putting your money in a Fixed Deposit and you are looking for investing in saving plans that offer guaranteed returns, you will have a plethora of plans to choose from. Canara HSBC Oriental Bank of Commerce Life Insurance has a wide variety of savings cum protection plans that you can buy for securing your financial future. For example, Guaranteed Savings Plan offers guaranteed benefits such as regular monthly income, guaranteed yearly addition, and guaranteed loyalty addition. You may also avail of the loan facility to meet any contingency need that may arise once your policy acquires a Surrender Value. Whether you want to plan for the higher education of your child, or you want to build a retirement corpus for yourself, this savings plan is the perfect option that you may consider.

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Frequently Asked Questions

What is saving plan?

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The amount that should be invested in a savings plan each month depends on the income, existing financial obligations and the long-term financial goal. If you have a steady income, you should save at least 20% of your monthly income. It is not necessary to invest your entire money into a savings scheme as investments should be diversified. Ideally, you should aim to have a financial buffer of over 10 times of your annual income. Choose an income plan based on your financial circumstances to stay afloat.

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What is the right age to start saving money?

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