Investment

Things to know before Investing in a Fixed Deposit

fixed deposit

Are you having some savings in hand? Want to invest it for future? Probably, you should think to invest it in a fixed deposit. Investing in a fixed deposit scheme can prove to be a good option for you if you are looking for a risk-free investment option for yourself.

Fixed Deposit Investment

Fixed deposit investment gives you the freedom to accumulate your savings and invest them at once for a mentioned tenor, and draw interest on those savings. FD schemes are classified into two types, namely cumulative and non- cumulative.

The cumulative scheme pays out the interes at the end of the tenor or the maturity of your FD, whereas non-cumulative scheme pays out interest on the periodical basis that can be monthly, quarterly or annually.

Investing in an FD instills the habit of saving into a person which is beneficial for longer-run of life. An FD has many more benefits for the investor. Let’s have a look at them!

FD Benefits at a Glance!

It acts as one of the direct income that you will get either on a periodic basis or compounded at maturity.

  • It is one of the safest options to invest. The interest rate of an FD is independent. The rate of interest remains fixed irrespective of the market fluctuations, making it a risk-free investment.
  • FD investment is preferred by many due to its flexible tenor. While investing in an FD, you are free to choose the duration for which you want to invest. A longer duration will fetch you greater value at the time of maturity, while shorter will leave you with quicker and small returns.
  • For any unplanned needs or urgent cash requirements, you can break or liquidate your FD before maturity. This will make you liable to pay a penalty amount for early withdrawal. Taking Loan against FD also resolves the issue of an immediate cash crunch.

Interest Rates and Risks

Investing in a fixed deposit will benefit you in earning higher interest rate. The interest rate on FD is never subject to any change. The rates do not fluctuate with the market fluctuations. The interest rate that is commonly given on an FD ranges between 7%-8%. Such investment schemes provide an additional benefit to senior citizens and offer them an additional 0.35% interest rate.

interest rate risk

Also, when you renew your FD, you get the opportunity to earn a higher rate of interest. So look out for more of such opportunities and make most out of it.

Also Read: What is fixed deposit? A guide for FD schemes

Necessary Documents to Apply for a Fixed Deposit!

  • ID Proof

It is mandatory to submit a self-attested copy of your ID proofs to the company. This is to certify that your identity and details like name, signature, facial features, etc. are true in all terms. Self-attested copy of Aadhaar Card, PAN Card, Passport, Driving License or Voter ID Card is accepted identity proofs.

  • Signature Proof

To ensure maximum security and fraud prevention, you need to submit a copy of your signature ID for verification. You can submit anyone copy of your Passport, PAN Card or Driving License.

  • Address Proof

To confirm your nationality and residence, you will have to submit a self-attested copy of your address proof which may include Aadhaar Card, Passport, PAN Card, Voter ID or Driving License. Along with it, you also have to submit a copy of your utility bill or even a bank account statement.

The Bottom Line

Investing has always been a good option, so why not invest in an FD. It gives you risk-free and assured returns at a higher interest rate. So, grab the opportunity to earn high on your savings from fixed deposit.

About Aman Khanna

Aman is working in the domain of Investment management in one of the top universities. He has published research papers and case studies in Investment and Fixed Deposit marketplace. He is an avid blogger in the domain of Investment management. you can also find him on social networking platforms

 

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About Ajeet Sharma

My Name is Ajeet Sharma Financial Blogger & Founder of Financegab.com. We are a personal finance blog dedicated to personal finance & financial planners. The main aim of this blog is to help people to informed financial decisions.
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