Everyone would agree that the world economy is dynamic and subject to the changes that might affect it. In such an unpredictable situation, how do you manage your investments? It is a question for which you would want an answer. After all, you invest your hard-earned money, and you would like it to perform or at the least, be safe. Smart investors believe in a diverse investment portfolio, i.e. a combination of low risk-low return and high risk-high return investment. High risk & high return investment would generally constitute mutual funds as they are volatile and subject to market risks. While there are many types of low risk & low return investment options, a first-time or an experienced investor would lookout for an alternative which is the best and provides better returns.
Fixed Deposits – Traditional & Trending
Interestingly, FDs have been here for a long time and still is an investor’s favourite. In these times of economic certainties, there has been an insurgence of fixed deposits again for obvious reasons. We want to state the bases in the below section.
Better & Assured returns:
Let’s admit that fixed deposit do not have high returns as a mutual fund or a debt fund, but here, the investor also does need to keenly look out for the market changes and worry about any losses due to market condition. In the case of FDs, your financial institution would fix a standard & best FD interest rate, which would remain the same throughout the tenure of your fixed deposit. Hence you get assured returns once your investment has reached the mature stage. A great piece of advice would be to invest in a financial institution, which is reputable and reliable. That way, you are not subject to the risk of banks/NBFCs closing down due to external factors. Note that under the scheme offered by RBI’s subsidiary, Deposit Insurance and Credit Guarantee corporation, you would be getting Rs.1 lakh as an insurance amount in case of bank failure.
Everyone needs to be clear about taxation when it comes to FDs. Note that the interest earned from fixed deposits is taxable and needs to be declared under, “income under other sources”. However, you can claim tax deductions upto Rs.1.5 lakhs in a financial year as per 80C of IT act. Hence you need to be cautious about your FD as there are multiple types and you do not want to have an option which does not provide you with a better return. You can always check with your financial partner on choosing the FD with best FD interest rates.
Better than contemporaries
Let’s take an example of low-risk contemporaries of FDs like PPF (Public Provident Fund), SCSS(Senior Citizens Savings Scheme), RD(Recurring Deposit), etc. While they are all great options for conservative investors, FDs score better because of short tenure and good returns. We would recommend you to have a look at the return and tenure comparison between the instruments mentioned above and know for yourself.