Fixed Deposits: The safe investment option even during market volatility

There are certain unwritten rules for making financial investments, one of them being “higher the risks, higher the return.” However, there is one investment option that is considered reliable as well as known to generate desired yields for its investors, i.e. fixed deposits.

Fixed deposits have been crowned by generations as the go-to investment option in India, given their features and flexibility. In times of financial crisis or economic uncertainties, investors desperately look toward a factor that can keep their finances safe while offering steady growth. Fixed deposits offer just that and much more.

Is fixed deposit safe? How do they help keep the economy stable amidst market fluctuations? Let’s read in detail.

Unaffected by the market
 

Several market-linked investments are available for a potential investor, such as equity instruments, mutual funds, gold, real estate, etc. However, these investment avenues come with a factor of volatility and uncertainty as the market is hardly ever going straight. A piece of negative news may lead investors to exit a particular stock and send the market into turmoil, eroding the retail investors’ wealth. This is why it is advisable never to put all your eggs in one basket. With fixed deposits, you are untouched by market volatilities. They offer stability, protection and growth to investors, thereby strengthening the overall economy.

Suitable for all investors
 

Whether you are a young investor starting afresh, a middle-aged investor looking to capitalise on your savings and diversify your investments, or someone close to retirement and wanting to earn a decent income from a stable form of investment by parking a sizable amount in a single investment avenue - fixed deposits offer something for everyone.

No two investors will have the same financial goals or investment strategies but will have a common interest, i.e. to protect their finances and earn steady returns from them. Fixed deposits are the common answer for all types of investors to park their idle cash in a savings instrument that is reliable and offers stability.

Flexible investment
 

Fixed deposits offer the best possible flexibility for their investors, both short-term investors and those looking to stay invested for the long term. With an investment tenure of as short as 7 days to as long as 10 years, there is room for everyone. As soon as your deposit matures, you can either re-invest it in the same deposit or invest it elsewhere if a lucrative opportunity presents itself, giving you free rein over your money.

Moreover, there is no ceiling to the total amount that you can invest in a fixed deposit, so you are free to keep a sizable chunk of your finances in fixed deposits where it is free from market risks.

Fixed returns
 

Most investment options in India promise high returns and elaborate outcomes against the investors’ hard-earned money. However, no one can precisely predict an investment’s outcome or the return it will undoubtedly generate, given that most rely on highly volatile market movements. A fixed deposit is one of the top contenders for the best investment option in India, specifying the returns and the income it will generate right at the time of investing. When the central bank raises key rates such as repo rate, the other banks and financial institutions in the country also follow suit. This is a good time for an investor to lock in their investment in a fixed deposit at a higher rate as they will be able to continue earning at the same interest rate, even if banks later decide to reduce rates for any reason.

Financial inclusion
 

Fixed deposits help strengthen the economy due to their features of stability and protection. In a country that primarily focuses on fixed deposits as the clear-cut investment avenue, it acts as a great tool to mobilise excess cash or funds and inject the same into the economy.

Middle-class Indians are left with little savings after meeting their day-to-day requirements and are generally wary of making investments elsewhere. They find fixed deposits to be a hassle-free and straightforward investment option which suits their appetite. A 2019 SEBI survey revealed that 95% of Indian families preferred bank FDs over other investment options as part of their financial planning. Conservative and risk-averse investors turn to FDs to park their savings, thereby pooling money in the banking cycle and promoting financial inclusion at the grassroots level.

Taxation benefits
 

The Government of India promotes financial inclusion and considers the increase in FDs a positive sign for the overall economy. In line with the same, the amount deposited in a tax saver FD is allowed as a deduction from the total income under section 80C of the Income Tax Act. The maximum amount that can be availed as a deduction is capped at Rs 1.5 lakhs. However, to avail of exemption, you must have a minimum lock-in period of 5 years. It is also to be noted that the deduction is only allowed in the year of deposit.  Further, the interest earned on tax saver FDs is taxable.

Overdraft facility
 

It is possible to avail of a loan against your fixed deposit amount. This feature is known as an overdraft facility and is an excellent option in times of financial emergencies. Usually, a sum up to 90% of your principal amount and interest accrued can be availed of as a loan. One of the ideal ways to avail of loans without disturbing your investment plan, fixed deposit makes for a good investment choice for all individuals, i.e. salaried, business people and working professionals.

In conclusion

The fixed deposit continue to enjoy the popular vote amongst investors and is one of the essential routes to achieving the nation’s financial growth. IDFC FIRST Bank Fixed Deposit helps you earn high returns on your idle funds and offers competitive and attractive interest rates, while the senior citizens enjoy an additional 0.5% higher interest rate on their deposits. With benefits such as monthly/quarterly interest payouts or a quarterly compounding option, IDFC FIRST Bank Fixed Deposit is one of the best investment options in India to park your funds safely.

You can track your investments and accounts with the IDFC FIRST Mobile Banking App.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.