Save for longer term goals with a fixed deposit savings account from Investec. Lock your funds away from one month to five years and earn a competitive interest rate. There are no monthly fees to erode your. Let us understand fixed deposits and other options, before making your final investment choice. What is a Fixed Deposit. A fixed deposit is a financial instrument, wherein you deposit your money with a bank, post office or financial institution, for a fixed term at a fixed.

Theconventional wisdom suggests, whenever you have some savings in hand, invest itin a fixed deposit. Yes, fixed deposits have been a great investment productsince ages (and still are), but you should also explore other investmentproducts, and then finally make your investment choice. Who knows, you may getyour hands at something better.

Letus understand fixed deposits and other options, before making your finalinvestment choice.

What is aFixed Deposit

Afixed deposit is a financial instrument, wherein you deposit your money with abank, post office or financial institution, for a fixed term at a fixed rate ofinterest. The interest rate on a fixed deposit is higher, in comparison with asaving account. Your money is locked for the fixed term chosen by you. If youwant to withdraw before end of the fixed term, then it can generally be donewith a penalty (The conditions vary from bank to bank).

NBFC(Non-Banking Financial Corporations) also offer fixed deposits. The companyfixed deposits generally carry slightly higher interest but higher risks also.The Bank fixed deposits are generally considered relatively safer.

Fixed DepositInterest Rates

Theinterest rates for fixed deposits keep on changing regularly. Interest ratesfor senior citizens are higher by at least 0.25% than what is offered to normalcitizens. Here are the links to fixed deposit interest rates of some majorbanks.

• ICICI Fixed Deposit Interest Rates
  
• PNB Fixed Deposit Interest Rates
• Canara Bank Fixed Deposit Interest Rates
• Andhra Bank Fixed Deposit Interest Rates
• Bank of Karnataka Fixed Deposit Interest Rates
• Dena Bank Fixed Deposit Interest Rates

Fixed DepositMaturity Calculator

Thematurity value of the fixed deposit can be calculated using the calculatorsavailable on various bank websites and other financial websites. Some of thefixed deposit maturity value calculators are as following:

HDFC FD Maturity Value Calculator

ICICI FD Maturity Value Calculator

Ask us any question related to fixed deposit.

How to open aBank Fixed Deposit

Abank fixed deposit can be opened conveniently by visiting a bank branch. Now adays a bank fixed deposit can also be easily opened online using internet banking.

When youshould invest in a FD

• Guaranteed returns: Invest in a fixed deposit, when you want fixed returns.
• No Risk Investment: You can invest in a fixed deposit, where you do not want to take risk.
• Loan against Fixed Deposit: You can invest in a fixed deposit and get a loan against the fixed deposit. Loan of up to 90% value of FD amount is generally sanctioned.
• Maturity Date: You can select the FD tenure as per your financial need and plan to get the maturity amount exactly when you need.
• Liquidity: FD provides liquidity option. Although the amount is fixed for the selected tenure, still the investor can liquidate the FD anytime in between. Although banks may charge some penalty for breaking the FD in between.

When youshould NOT invest in a FD

• High Returns: Do not invest in a FD, when you are chasing high returns. There are plenty of options available which can get you way higher returns, in comparison to FD.
• Taxation: FD's attract income tax. Hence if you are in a higher income tax slabs, then effective yield of fixed deposit is very low, post income tax.
• Higher risk capacity: You should explore options, other than FD, in case you can go for a bit higher risk on your investment. For example, you can invest in equity mutual funds, if you want higher returns and can take higher risk. Similarly, debt mutual funds can be selected in case of a balance between returns and low risk is desired.
• Long Tenure of investment: If you are investing for a medium or a long term and are not risk averse, then you may explore mutual fund options. Mutual funds generally give good returns in long term.

Alternativesto Fixed Deposit

Generally,as conventional investors and lack of financial knowledge, our inclination istowards fixed deposit. Investors can explore other options available in marketas per their need.

a. Debt Mutual Funds

Debtmutual funds invest in instruments, which are safer and provide comparativelystable returns like corporate bonds and Government securities. These mutualfunds can provide higher returns compared to fixed deposits. Liquidity is alsobetter in case of open ended debt funds, which can be redeemed anytime.

b. Equity Mutual Funds

Equitymutual funds invest in equity (Share) markets. These are high risk and highreturn investment. If you are investing with long term horizon and want reallyto create wealth, then you can go for equity mutual funds. The risks canbe reduced by investing in form of a SIP (Systematic Investment Plan). However,you should develop a basic understanding of mutual funds before investing.

Investorswilling to go for a little higher risk and wanting a little higher return, canexplore the option of corporate fixed deposits also. Corporate fixed depositsoffer higher interest rates compared to a bank fixed deposit.

FixedMaturity plan invest in debt instruments, which provide higher security andfixed returns. However, unlike FD's where you get guaranteed maturity amount,fixed maturity plan give indicative maturity amount. But the investment cannotbe liquidated in between tenure. Hence invest in these only when you are surethat money will not be required in between.

Ifthe purpose of investment is for long term needs, like retirement planning,then you can open a PPF account also. The returns on PPF are higher than of FD.Returns on PPF are tax exempt, unlike FD. PPF has a lock in of 15 years, butthe loan facility is available from 3rd to 6th year from opening account. From7th year partial withdrawal is allowed.

Theseare a good alternative to fixed deposit as the returns are higher. But the lockin period in case of Government bond is longer. Also, government bonds aregenerally subscribed by Banks and big financial institutions and are many timesout of public reach.

NSCis issued by post offices. NSC offers a bit higher returns than FD. They havetax saving advantage. They have lock in period of 5 years.

Best Investments For Rising Rates

Conclusion

Fixed Deposit Investment

Manyinvestors as per conventional wisdom invest in FD without exploring otheralternative options. In current scenario when the interest rates are goingdown, the FD has become a less attractive investment option.

Ifyou are striving for higher returns, and ready to take a bit more risk, then markethas plenty of attractive alternate options.

Contact us to invest better. We will be happy to help.

Further Suggested Reading

Why Should I Invest ?

Where Should I Invest ?

How Should I Invest ?

How much Should I Invest ?

When Should I Invest ?

Mutual Fund Basics.

• How to select best performing mutual funds for investment?
  

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