- How to decide which investment option is the best for you?
- How does a Fixed Deposit Work?
- What factors do you have to consider while comparing FDs online?
Experts recommend that the best way to inculcate the habit of savings is to make investments. There are many investment plans available in India in which people can invest their money and earn returns on their investment. Most experts advise you to start your investment journey early in life because you will have many years for the investment to multiply. This multiplication happens over several years in fixed deposit (FD) and recurring deposit (RD).
Some of the investment schemes in India are FD, RD, savings bank account, mutual funds, shares, gold, real estate, etc. Mutual funds are funds where individuals invest money regularly through a fund manager, who invests that money to buy shares. Mutual funds and shares are market-linked. They are related to stock markets, and the interest returns depend directly on the market performance. They offer high returns on investment but are also riskier than bank deposits.
Investment options in India are divided based on risks and returns. For instance: Stock-market related investment plans offer high returns (profit), but the risk is also higher. However, a fixed deposit offers constant returns, irrespective of market performance (interest rate) for the entire duration and carries the least risk. This is the best investment scheme with a fixed rate of interest throughout the tenure and poses no risk for the investor to lose money.
Liquidity i.e. ability to convert into cash
Investors are often confused about which is the best investment plan for them. Here are a few pointers that you should consider before investing your money anywhere:
Goals are different for every investor as everyone has different needs and priorities. Your goals can be your post‐retirement life, your child’s higher education, his/her wedding, a house, a car, etc. Timelines for each goal for each individual are different, so invest accordingly.
For instance: If your goal is to buy a house after five years, then your investment duration will be five or less than five years. Based on these goals and investment duration, you decide which investment plans are best for you.
There are many risk profiling tests available online that you can take to know your risk‐taking capability or risk appetite. These tests will let you know whether you should invest your money in less risky asset classes offering safe returns on investments or in risky asset classes like equity and mutual funds.
Before investing your money in any asset class, you should look for past returns it has delivered over the years. It could be high-interest rates in an FD or past returns of a mutual fund or shares or gold for that matter. Historical returns are of the years gone by and the asset class cannot be assumed to deliver the same returns going forward. However, historical returns give you a good understanding of how this particular asset class has performed in the past. Accordingly, you can also compute the risk-to-reward ratio, since you get to know the risk element involved and also the past returns now.
If you are planning to invest, be it in any asset class, make sure to understand the business. For instance: If you are investing in shares of a company, research everything about that company and see if you understand their operations and business idea before putting in your money. You need to be sure of where you are investing and if there is even a slight element of doubt then clarify it with professionals. Doing your research is very important, be it a fixed deposit or mutual funds, this will help you finalize the best out of all the investment options available.
Some of the factors like death benefits, diversification, compounding benefit, risk-to-reward ratio, historical returns, etc. should be considered while comparing different investment plans. Always remember, the safety of your money is of paramount importance and the returns part is secondary. This is because you don’t want to lose your hard-earned money while fetching higher returns in the process of investing. The returns on your investment might be low but the safety of the invested money is important.
Fixed deposit or an FD is a type of banking product that falls under the category of term deposits. The ‘term’ in term deposit denotes the number of years in an FD or its tenure. It is simple and the best investment scheme for all types of investors as it offers assured returns with the least risk involved. Here’s how it works in chronological order:
Multiple options, renewal, premature withdrawal facility, and lowest risk ensure high returns on investment on FDs.
Now that you have a basic idea of what a fixed deposit is and how it works, you should know the factors you need to consider while comparing several FD options available in India. Here it goes:
The above information aims to guide you in choosing the right investment scheme and how FDs work. If you want to know more about fixed deposits and all related terms and conditions, you can visit this link. We at Shriram City Union Finance offer the best investment schemes with the highest rates on FDs. We also give an additional 0.40% interest rate to senior citizens with multiple other facilities. Visit our website to know more about our offerings. Allow us to serve you!