Fixed Deposits (FDs) are a low-risk investment option. They offer guaranteed returns and are safer than many other investments. Even within this stable option, there are ways to boost your returns. Here are some tips to help you get the most from your FD investments.
Choose the Right Tenor
The tenor of an FD is crucial. Generally, longer tenors offer higher interest rates. But this isn’t always true. Compare rates for different tenors before deciding. Some banks might offer better rates for one-year tenors compared to six months or two years.
Compare Interest Rates
Different banks offer different rates on FDs. It’s important to shop around and compare these rates. Don’t just go with the first option you find. Use online tools to compare rates across banks. Websites and financial platforms often provide updated information on FD rates.
Opt for Cumulative FDs
Cumulative FDs reinvest the interest earned. This means you earn interest on both the principal and the accumulated interest. Over time, this can significantly increase your returns due to compounding. Non-cumulative FDs pay out interest at regular intervals. These can be beneficial if you need regular income.
Consider Premature Withdrawal Penalties
FDs are meant to be held until maturity. But life is unpredictable. You might need to withdraw your funds early. Know the penalties for premature withdrawals. Some banks charge hefty fees, which can erode your returns. Always read the terms and conditions about premature withdrawal before investing.
Ladder Your FDs
Laddering spreads your investment across multiple FDs with different maturity dates. This strategy provides liquidity and takes advantage of varying rates. For example, instead of investing ₹1,00,000 in one FD, invest ₹25,000 in four FDs with tenors of one, two, three, and four years. As each FD matures, you can reinvest or use the funds.
Use the Auto-Renewal Feature
Many banks offer an auto-renewal feature. This means your FD will automatically renew at the prevailing rate when it matures. This ensures your money continues to earn interest without any action from you. However, always check the new interest rate to ensure it’s favourable.
Look for Special FD Schemes
Banks often roll out special FD schemes with higher rates for limited periods. These might be aimed at specific customers like senior citizens. Additionally, they may offer additional benefits. Keep an eye out for these schemes as they can provide better returns than regular FDs.
Invest in Bajaj Finance FD
Bajaj Finance FD is known for offering competitive rates and flexible tenors. With it, you can benefit from attractive rates and various investment options. This helps you maximise returns while ensuring your investment’s safety.
Tax Benefits
Tax-saving FDs offer tax benefits u/s 80C of the Income Tax Act, 1961. These typically have a lock-in period of five years. The interest earned is taxable. However, the initial investment can be deducted from your taxable income. Consider these FDs if you’re looking for tax-efficient options.
Avoid Frequent Withdrawals
Frequent withdrawals can erode your returns due to penalties and loss of interest. If you anticipate needing funds soon, it’s better to invest in short-term FDs or keep the money in a savings account. Planning your finances and understanding your liquidity needs can help avoid premature withdrawals.
Use Online Tools
Many online tools can help you plan your FD investments. These tools provide estimates of returns based on different tenors and rates. They also show the impact of taxes and penalties on your returns. Using these tools can help you make informed investment decisions.
Diversify Your Investments
While FDs are safe, it’s wise to diversify your portfolio. Don’t put all your money into FDs. Consider other investments like mutual funds, stocks, or real estate. These can help spread your risk further. Diversification helps achieve a balanced portfolio and protects against market volatility.
Stay Updated on Interest Rates
Interest rates fluctuate based on economic conditions and RBI policies. Stay updated on the latest rates and economic news. This helps you make timely decisions about your FD investments. It also lets you take advantage of favourable rate movements.
Reinvest the Interest Earned
If you have non-cumulative FDs, consider reinvesting the interest earned. You can do this by opening a new FD or investing in other financial instruments. Reinvesting the interest helps you benefit from compounding and increases your overall returns.
Choose the Right Bank or NBFC
Not all issuers are the same. Some offer better service, higher rates, or more flexible terms. Research and choose a bank that meets your needs and offers the best terms for your FDs.
Monitor Your Investments
Regularly monitor your FD investments. Keep track of maturity dates, rates, and any changes in terms. This helps you make timely decisions about reinvestment or withdrawal and ensures you’re always getting the best returns.
Consider FD Laddering with Different Banks
To further diversify your risk, consider laddering your FDs across different banks. This provides liquidity and takes advantage of varying rates. It also protects your investments from the risk of one bank defaulting.
Understand the Impact of Inflation
FDs offer guaranteed returns, but inflation may reduce the purchasing power of your money. Consider the real rate of return on your FDs, which is the interest rate minus the inflation rate. Aim to invest in FDs that offer returns higher than the inflation rate.
Use the Click Here Feature for Easy Access
Many banks provide a “click here” feature for easy access to FD investment options. This allows you to quickly compare rates and make decisions without extensive research. Using these features saves time and effort in managing your investments.
Plan for Long-Term Goals
FDs are suitable for both short-term and long-term goals. For goals like retirement or children’s education, consider investing in longer-tenor FDs. Alternatively, you can consider using the laddering strategy. This ensures a steady income stream and that your investments grow over time.
Maximising returns on your FDs requires careful planning. Choose the right tenor, compare rates, utilise auto-renewal, and consider tax-saving options. By doing so, you can significantly boost your returns. Investing in Bajaj Finance FD offers competitive rates and flexible options. Stay informed, diversify your investments, and use online tools to make the most of your FDs. These tips ensure your money works harder while keeping your investments safe.