FD a good option for investment in India?


As you build your investment portfolio, you would invest in many different instruments, and each of them would fulfil a specific function. One of these instruments that you should consider is the fixed deposit. Fixed deposits offer many different advantages and can fulfil some important roles in your investment portfolio, based on your risk profile and financial goals. 

Here are a few investment goals for which fixed deposit is a great option in India.

 

Post-retirement savings

Once you are no more actively earning, you must limit the risk exposure of your investments. One of the best ways to do this is by investing in fixed deposits. PNB Housing offers among the best FD rates in India and is highly secure with an FAAA/Negative rating from CRISIL. You could also opt for a non-cumulative fixed deposit to get a regular income from the corpus you have built up. Fixed deposit rates for senior citizens is also 50 basis points higher compared to the rates offered to other investors.

 

Balance a high-risk portfolio

When building an investment portfolio, you must balance the risk among different instruments. For example, an investment into mid- to small-cap equity caries a high risk. If such a risk is realized, you do not want to lose all your capital. Therefore, you should use low-risk debt instruments to balance your portfolio. A fixed deposit can fulfil this role perfectly as it offers a fixed, guaranteed return on the investment made. 

 

Build a corpus at a low risk

 If you wish to grow your funds over a long period without taking on any undue risk, a fixed deposit can be an ideal instrument for you. Choose a cumulative fixed deposit with a term of 10 years and let the best FD rates in India compound over the years. The magic of compounding ensures that your funds grow rapidly. This can be a good strategy when saving up for buying a car or a house. 

 

Park surplus cash

If you are an entrepreneur and have any surplus cash – you should park it in a fixed deposit rather than in a savings account. The reason for this is simple: you would earn a much higher interest rate on FDs, without sacrificing on the liquidity of the funds. Further, if you have a large number of fixed deposits saved up, these can help you secure a large loan to expand your business or grab a new opportunity. 

 

Meet section 80C limit

Tax-saving fixed deposits are tax-exempt under section 80C of the Income Tax Act. You can apply for a tax deduction of up to ₹1,50,000 under this section. In case you have not reached this goal yet, consider investing in a tax-saving fixed deposit to do so. These FDs have a lock-in period of five years, so make sure that your liquidity requirements for this period can be met even if you make this deposit.

Compare the offerings of different banks to get the highest FD interest rates in India. Given the many advantages of investing in a fixed deposit, you should consider making it a part of your investment portfolio.