Fixed Deposits are a secure and convenient way to grow your savings. From hassle-free opening to seamless transfers, FDs offer much more. Hence, consider allocating your funds to FDs to diversify and build your investment portfolio.
Before understanding the immense benefits of FDs in your investment portfolio, understanding what is Fixed Deposit is crucial. FDs are an investment scheme provided by banks and financial institutions that allows depositors to park a lump sum amount with the bank at a pre-determined interest rate for a fixed tenure. Let us explore why an FD is lucrative for your investment portfolio:
Reduces portfolio risk
The key to wealth creation lies in asset allocation. Several asset classes, such as Equity, Gold, Fixed-Income Instruments, etc., play different roles in the investment portfolio. While Mutual Funds can provide the growth potential of equities over the long run, Fixed-Income Instruments can bring a lot of security, safety, and stability as they offer guaranteed returns.
Flexibility
Hard times can come without a warning. FDs can prove to be a real saviour during such times. This is because an FD allows you to withdraw funds before maturity. Though you might have to pay a basic fee or penalty first, the process involves no hassle.
Assured returns
When you choose to invest your money in an FD, you know the amount you will get from the FD during maturity. No matter how the economy performs or the interest rate changes, you will get the returns as agreed upon at booking time. This helps you plan your money well, as there are no surprises when the money comes in.
Tax savings
As per Section 80C of the India Tax Act, Tax-Saving FDs allow annual tax deductions of up to Rs. 1.5 lakh. However, a Tax-Saving Fixed Deposit comes with a five-year lock-in period during which no premature withdrawal, overdraft facility, or Loan is sanctioned.
Loan against FDs
If you face an immediate financial crunch, you need not necessarily liquidate your FD. Nowadays, banks provide Loans against FDs, which can keep your investment safe and provide the proper financial assistance during an emergency.
Diversification
Diversification is all about balancing risk with reward. While Equity, Stocks, and Mutual Funds are great ways to earn substantial returns in the long run, they come with their set of risks. FDs are an excellent tool for balancing risk in an investment portfolio and offer a safe space during uncertain economic times.
Conclusion
An FD is a reliable and straightforward investment instrument that offers a safe avenue to build wealth and financial stability. Whether you aim for long-term growth or immediate returns, an FD is a lucrative investment asset for you.
