As banks have hiked interest rates after RBI’s decision to raise the repo rate to 4.90 per cent in two tranches, it is wise to invest in FDs.
Fixed deposits (FD) are considered trusted financial investments that reduce the adverse effects of market volatility on your savings. As FDs have a flexible tenor, the investor can comfortably plan his/her short to mid-term goals. They are also considered an easy investment option as the eligibility criteria, and the investment process is much easier than other investment methods.
As banks have hiked interest rates after the central bank’s decision to raise the repo rate to 4.90 per cent in two tranches, it is wise to invest in tax-saving FDs.
Despite the ease of investing in an FD, it is crucial to note certain things before leaping. Here are some aspects to research before investing in any FD.
While most of us pay close attention to the interest rates on FD, we often ignore considering multiple payout options. These options decide if you will get your interest at the time of maturity or periodically. This depends upon the type of FD you pick.
If you wish to get steady returns on the FD every month, you should opt for the non-cumulative FD to get monthly interest. If you are investing for a bigger future goal, you can go for a cumulative FD.
While most people invest in FDs with long-term objectives, some might have to liquidate their investments before the end of the tenure in emergency cases. Certain banks permit customers to break their FDs prematurely without penalty if they reinvest their savings with the same bank again.
As an investor, it is crucial to check the penalty charges that will be implied in case of premature liquidation of an FD.
If you wish to invest wisely, make sure you keep a check on the things mentioned in the above list. Notably, financial decisions should always be made smartly.