Benefits of Investing in a Fixed Deposit

  • Fixed Deposit
  • 2 Months ago
Benefits of Investing in a Fixed Deposit
HIGHLIGHTS

  • Simple to Understand
  • Avail Loan against Fixed Deposit
  • Effect of Compounding
  • High FD Interest Rates
  • Tax Saving Deposit Scheme
  • High-Security Deposit
  • Lower Risk Investment


Everybody is aiming at creating wealth and increasing their capital over a specific period. There are several financial instruments available today, which are correlated with future growth and rate of return. Not investing in growth tools means you are losing out on financial progress. Understanding which investment choices suit your needs can be one of the most challenging tasks in the creation of a financial plan. Nearly every person you meet has some form of financial advice, which makes you even more confused. Nonetheless, you can make educated decisions based on actionable knowledge, thanks to the internet era.

Although investment strategies are customised according to our goals, desires, and needs, certain financial instruments should be included in each portfolio. One such financial instrument offered by the banks and non-banking commercial companies (NBFCs) is a fixed deposit (FD). There have been varying discussions regarding the conventional fixed deposit financial instrument, and it is still one of the cleverest investment options that can find a place in your investment portfolio. Hence, you should definitely invest in fixed deposits.

Whether you are contemplating your first step in FD online or you are an experienced investor, here are a few advantages of fixed deposit investment:

Simple to understand

The simplicity of the financial instrument is perhaps one of the best-fixed deposit account advantages. As safe it is to invest in fixed deposits, it is equally simple to understand. For instance, an investment of Rs. 1 lakh at 7.25% p.a. interest would yield a profit of Rs. 7,500 (Shriram City Cumulative Fixed Deposit Scheme). The fluctuations in the stock market will not drag this profit down. In comparison to financial instruments such as equity securities, there is no need to track the investment in a fixed deposit continuously. A fixed deposit investment does not include 'highs' and 'lows' linked to the economy.

Facility to avail a loan against your fixed deposit

Instead of taking an unsecured loan with a high-interest rate, fixed deposit holders have an opportunity to take advantage of a loan against their investment. Certain fixed deposits like that of Shriram City Union Finance (SCUF) have loan facilities that provide you with easy access to capital in the hour of an emergency. To avail of this facility, a minor rate of interest (0.5% to 2%) is levied. In this way, a person can take advantage of the loan facility without going through the trouble of unsecured loans and at the same time, not sacrificing interest on SCUF deposits online. Benefits of fixed deposit accounts such as these, make the option of fixed deposits all the more enticing.

The wonder of compounding

“The more we progress, the more we tend to progress. We advance not in arithmetical but in geometrical progression. We draw compound interest on the whole capital of knowledge and virtue, which has been accumulated since the dawning of time.” – Sir Arthur Ignatius Conan Doyle

Individuals can start early and increase their wealth over time with the effect of compounding. Compound interest can assist a small investment to turn into a large sum over time. There are two ways in which interest earned in SCUF deposits online is paid – cumulative and non-cumulative. In a cumulative deposit option, interest is accumulated over a period of time upon which further interest is earned (compounding effect). The interest is paid along with the principal amount to the investors upon the maturing of the investment option. Such cumulative deposit options are available with Shriram City Union Finance at attractive FD interest rates, which can assist you in achieving your investment goals efficiently. The power of compounding is one of the topmost advantages of fixed deposit investment. Hence, you should surely invest in fixed deposits.

A non-cumulative deposit option is the opposite of the cumulative deposit option. In this variant of the SCUF deposits online, interest is paid to the investors at regular intervals.

These intervals are chosen by the investor/ depositor themselves and can be as follows:

  • Monthly
  • Quarterly
  • Half Yearly
  • Yearly

The non-cumulative deposit alternative is ideally fit for individuals looking for a regular income. On the other hand, it is recommended that individuals who have recently started their professional journeys invest in cumulative options for higher returns by allowing the power of compounding work for them.

Fixed deposit account advantages such as these, make the option of fixed deposits all the more attractive.

Higher FD interest rates for senior citizens

Getting the best FD rates for senior citizens is one of the best benefits of fixed deposit accounts. In India, senior citizens are granted higher interest rates on their fixed deposit investments. Shriram City offers preferential interest rates to senior citizens, which is 0.25 per cent higher than the standard FD interest rates offered. This is one of the fixed deposit account advantages.

Tax-saving

Investors can opt for tax-saving fixed deposits online variants, which are provided by all banks. Such an investment would allow you to bring down your taxable income, which will also reduce the tax payable. Individuals can invest up to Rs. 1.5 lakh in a tax-saving FD online and this investment can be declared under section 80C of the Income Tax Act or 1961. Such schemes or fixed deposits, online options have a 5-year lock-in period associated with them. Premature withdrawals from this option are barred except in case of the untimely demise of an investor. Tax-saving is known to be one of the most alluring fixed deposit account advantages.

High-Security

High security is perhaps one of the best benefits of a fixed deposit account. Safety and low-risk are the parameters to look out for in investment options when you have a low-risk tolerance level. Companies such as ICRA Limited provide ratings for financial instruments based on the safety of funds. The ‘MAA+’ is the highest rating for public deposits offered by ICRA Limited. The rating of ‘MAA+’ for a financial instrument indicates that it has the lowest credit risk. Searching for a fixed deposit online, which has the highest interest rates with ICRA rating of ‘MAA+’, is a smart way to diversify your capital without compromising on returns. Shriram City Union Finance has an array of ‘MAA+’ rated fixed deposit schemes, which have modest interest rates and low credit risk.

Low risk

Having a low risk on your investment is one of the best advantages of fixed deposit investment. One of the safest and oldest investment options provided by financial institutions across India is the fixed deposit. There have been a few arguments stating that variable income instruments generate higher returns as compared to fixed deposits. It is true that variable income investment options such as derivative instruments, mutual funds, and equity shares, do yield higher returns. However, these instruments are associated with higher risks.

Their level of risk tolerance often guides the investment decisions of an investor. When aiming for higher returns, there is always an element of higher risk, which can cause a significant loss to the investor in adverse market conditions. An ideal investment portfolio should be a mixture of risk-free and risky instruments, according to the level of risk tolerance of an individual. Wealth management experts at Shriram City Union Finance assess your levels of risk tolerance, investment goals, and help you achieve the best FD rates and make informed decisions.

Fixed deposits are suited to fulfil all your needs, be it the comfort of benefits and returns, surety, or security. These aspects, coupled with best FD rates, hence, make Shriram City FDs must be included in one’s investment portfolio. Shriram City FD online schemes are designed to serve the investment goals and risk appetite for different types of investors.

Whether you have a low-risk tolerance level, want a safe and secure way of earning returns, or you have a high-risk tolerance level and wish to cap your investment, Shriram City FD is the way to go! Start a fixed deposit now, to earn guaranteed returns!

Before investing, it is important that you read the policy documents carefully. It is of utmost importance to read the policy documents to understand what you are investing in, and the services you will get with your investment. Although fixed deposits have a low risk compared to variable investment options or investing directly in the stock market, it is imperative that you gain as much knowledge as you can about the instrument in which you wish to invest. Knowing about fixed deposits will help you make educated choices and enjoy higher rewards with lower risk thoroughly.