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Why to Invest In Fixed Deposits?

Fixed deposits are one of the oldest and safest investment instruments provided by the banks. The interest rates on fixed deposits are higher than the interest provided on savings account or current account balances. It is necessary for every individual to diversify his or her investment portfolio into various types of fixed income and variable income investment sources. Fixed deposits are a regular income source of investment.

Reasons for investing in Fixed Deposits

Below are some of the best reasons for investing in fixed deposits:

  1. It is risk-free and guarantees fixed returns.

  2. Fixed deposit interest rates are higher than other risk-free investment instruments like Treasury Bills or Government Bonds.

  3. Fixed deposits provide complete flexibility with regard to the tenure of investment. The term of fixed deposits can vary between 7 days to 10 years. The investor can choose any time-period for investment in fixed deposits.

  4. Investors can avail loans or overdrafts against fixed deposits whenever required.

  5. It is a liquid investment; you can break your fixed deposits either partially or completely, when required.

  6. It saves you from the uncertainties of the markets and you can concentrate on your business or job by keeping your investments safe in fixed deposits.

  7. Tax saver fixed deposits of 5 years are helpful for tax savings as the investor can claim tax deduction for the money saved in it as per Section 80C of the Income Tax Act.

Fixed Deposits: A Risk-Free Investment

There are some arguments against investment in Fixed Deposits stating that some variable income investment instruments yield higher returns. The variable income instruments such as Equity shares, Mutual Funds and Derivative instruments can provide higher returns but there are higher risks associated with it. The risk tolerance level of an investor guides the investment decisions. For higher returns, there is always a higher risk element, which can also mean losing a huge chunk of money at some point of time in adverse market situations. An ideal investment portfolio is a mix of risky and risk-free investments as per the risk tolerance capacity and risk averseness of an individual. Wealth management experts at Yes Bank help you make the right decisions in relation to your investment needs after assessment of your investment goals and risk tolerance levels.

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