One of the easiest ways to invest your money into a high-yielding product, a fixed deposit is a secure investment because the amount invested remains fixed at all times. This means you can plan your future expenditures with a fixed deposit.

Fixed Deposit is also a full-fledged banking solution because you get all the same privileges as a regular account holder.

A fixed deposit (FD) refers to a financial instrument provided by banks or NBFCs that offers investors a higher interest rate than for regular savings accounts until the given maturity date.

FDs are highly popular today due to the safety and security they offer. Several people in India opt for this scheme knowing that they will get returns regardless of market fluctuations. All they need to do is invest a principal amount and let the permanent FD interest rates work their magic.

Investors then gain interest on their deposit, which grows, leaving them with a more considerable amount upon maturity.

Why invest in Fixed Deposits? 

The reasons for investing in the best FD plans range from high-interest rates to guaranteed returns. Additionally, FDs add to your investment portfolio’s security. Therefore, many people choose FDs for these reasons:

• Guaranteed Returns

Unlike more volatile investments like stocks, returns from FD accounts are not subject to market fluctuations. It makes them a much safer investment option. 

• Allows Premature Withdrawal

You can withdraw your FD prematurely, if necessary. Although you will incur a penalty, the FD ensures you always have a sum of money to depend on at any time.  

• Good Interest Rate

FDs also offer some of the best interest rates in India, comparable to returns from mutual funds, for a fraction of the risk. The interest rate is also better than returns on savings accounts, further contributing to their popularity. 

• Easy to Monitor

Managing an FD is very easy since interest rates remain constant. You are never in doubt about its performance. The primary consideration you need to make is regarding the FD’s maturity date.

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Factors Determining the Best Fixed Deposit Plan in 2021

• Interest 

Based on tenure and investors’ age, the interest rates offered by banks differ. You should also remember that bulk or lump sum deposits incur some of the best FD interest rates in India that remain the same over the investment tenure.

• The Credibility of the Bank

The DICGC secures FDs through a depositor insurance program, ensuring that investors feel safe putting their money into the deposit. However, experienced investors and industry experts also advise against placing all your money in one FD. Instead, breaking down the investment amount and distributing it across multiple schemes reduces their dependence on a single institution while benefiting from various providers.

• Loan

Some good FD schemes offer a loan facility to investors, which is one of the significant benefits of this deposit scheme. During any financial emergency, one can avail of loans against FDs, up to 90% of their deposit.  

• Cumulative vs Non-Cumulative

A cumulative FD enables reinvestment after maturity, giving the investor a compound interest rate. Investors who want returns at regular intervals during the FD’s tenure can opt for a non-cumulative option. This provides monthly or annual returns.

Conclusion

Fixed deposits ideally suit those who need a regular income. Rather than using them for long-term goals, sensible investors use them for the preservation of capital. Therefore, lock in your funds judiciously to support your short-term goals and objectives with good FD plans offering healthy interest rates. You can put research to arrive at the best plans offered by various financial institutions. 

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