Fixed deposits or term deposits are one of the most widely used and popular instruments for investment. However, in the recent past, the rates of interest for fixed deposits have not been very impressive. When you invest in fixed deposit scheme, you will have to keep in mind a number of factors. Here are a few things that you can do to make the most out of your fixed deposit(s).
Although we often tend to check only the rate of interest that is offered on a fixed deposit account, it is important to keep an eye on the yields as well. Some schemes might offer compound interest on your term deposit scheme on an annual basis, while some tend to offer the same on a quarterly basis. In this case, it should be noted that the overall yields are going to be higher in the latter case. It is suggested to keep an eye on the same before you choose an institution to start your FD account.
Fixed deposit schemes offered by banks might not be the best offer available in the market. It is advisable to look for options beyond the schemes offered by public and private banks. There are a handful of company fixed deposit schemes which offer significantly higher rates of interest. Looking for and comparing these options before settling down for a term deposit scheme is likely to help to gain more out of your investment and make the most out of the term deposit scheme.
The basic difference between a cumulative FD and a non-cumulative FD is the method of payout. While the non-cumulative term deposit schemes offer interest payouts on a monthly, quarterly, bi-annual, or annual basis, the cumulative term deposit schemes offer the payout at the end of the investment tenure. The latter option will help you generate more interest as the same will be calculated as compound interest. However, if you are someone who is looking out for a periodic payout scheme, the non-cumulative will be your go-to option. However, if wealth generation is your primary motive, a cumulative term deposit scheme will be the best bet for you.
In general, it has been witnessed that the interest rates for fixed deposit schemes rise with inflation. Thus, it is suggested to invest in a short-term fixed deposit scheme which will help you tackle inflation. This method of investment will help you maximise your returns from your fixed deposit schemes.
Multiple investments across different fixed deposit schemes helps in gaining better liquidity. It will also offer you with consistent returns. Consider breaking down your entire investment into fractions and consider investing them in different schemes for varied investment tenures. This will help you build and ladder of investments. In turn, these will help you make the most out of your invested amount.
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