Fixed Deposits (FDs) attract a lot of investors since they offer guaranteed returns and are not prone to market fluctuations. With the banking sector performing well for some time, a lot of lenders are offering attracting interest rates. However, if you also want to invest your lump sum amount in a FD, keep these three things in mind that can help you maximise your returns.
Fixed Deposits (FDs): With the stock market performing well for many months, investors have many options to get high returns, but a lot of investors seek options that give them guaranteed returns. They want risk-free investment options that are undeterred by market fluctuations. Fixed Deposit (FD) emerge as one of the safest and most popular options for them. They think their money will remain safe in FD. Apart from this, they can invest in FD for durations ranging from 7 days to 10 years. With the banking sector performing well for some time, many lenders are offering high interest rates on FDs. However, rates may differ from bank to bank. If you are also going to invest your lump sum amount in FD, keep these three things in mind that can help you maximise your returns.
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FD: Choose the right tenure
Before investing in an FD, invest money only after thinking carefully about its tenure.
It is because if, after investing in an FD, you break the FD before its maturity, you have to pay a penalty for it. In such a situation, you do not get the interest on FD for which you had invested the money. If the FD is broken before it matures, a penalty of up to 1 per cent is also levied on it.
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FD: Do not invest all your money in one FD
If your amount is large and you want to invest it in an FD, do not invest all your money at once in one place, but invest it in different FDs.
Suppose you have Rs 5 lakh, you can invest in 5 different FDs of Rs 1 lakh each.
Fix each FD for different tenures ranging from 1 year to 5 years.
This is called FD Laddering Technique.
When you invest through this, your FD matures every year and you remain with sufficient liquidity.
Suppose you fixed money for 1, 2, 3, 4 and 5 years.
In this situation, you have 5 FDs. The first FD will mature in 1 year.
Whatever interest you got on this FD, you should get the entire amount including that interest fixed again for the next 5 years.
Your second FD will mature in the second year.
In this way, you have to re-fix the FDs maturing every year one by one for the next 5 years.
In this way, you will get the FD fixed every year with the increased amount, including interest, and then interest will be earned on that entire amount.
In this way, you can earn a lot of profit through this.
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FD: Tax saving FD
FD investors should also know that if you fix the amount in FD for 5 years, then you can also avail tax benefits on it. A 5-year FD is called tax savings FD.
By investing in this, you can claim tax exemption up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
In this way, you can benefit yourself.
