Investment is essential to attain financial freedom in life and reduce your dependency on your income. It is considered to be one of the best ways to increase your wealth so that when you retire, you do not face any financial constraints.
When it comes to investment, there are multiple options available, and it can be perplexing to decide which one is better. However, if you are looking for a platform where there is a minimum risk, then you must go with a fixed deposit.
What are the Benefits of fixed deposit
The best thing about the fixed deposit is that unlike other investments, there is a negligible chance of facing any loss as the money is kept in your own account. Here are some other major benefits of the fixed deposit that you must know
- Guarantee of returns
- Multiple FD accounts can be opened simultaneously
- Compound Interest rate
- Flexibility to choose the duration of investment
- Less complicated
So, investing in a fixed deposit can be highly beneficial and rewarding. But to make the most of your investment, you must know how to use it in a proper way. Making mistakes will not give your returns that you will be expecting and also you might even lose your money.
Things to keep in mind when investing in Fixed deposit
There is no doubt in the fact that FD is a stable option for investment that provides satisfactory returns. The money that you will get in the end can be used to fulfil your financial goals like:
- For your children’s education
- To purchase your own car
- Collect funds for your start-up
- For your retirement
You will be able to accomplish your goals when you have a clear understanding of the fixed deposit. Now, to help you get to make the most of your FD schemes, we have mentioned few important things that you need to consider when investing.
Do good research on the market for the best company
There is a big myth among people that fixed deposits are provided only by the banks. Well, this is not true as many private financial firms are there in the market that specialises in FD schemes. Also, the process of opening an account is the same or even faster than the bank. The private firms even offer higher APR (Annual Percentage Rate), so don’t restrict your option only to the banks.
Do complete research on the market to know where you can get maximum returns without any inconvenience.
Invest as per your goals
If you are about to invest in FD, then make sure that you are doing with a purpose. Spending your money and time to make more money will not help you because you will not be able to reach the point of satisfaction. Make a list of all the goals both short term and long-term that you want to achieve and then invest carefully.
Having goals in your mind will help you in deciding how much you must invest in the FD. If your aim is to reach the short term goal, then you must invest for a smaller tenure (6 months to 1 year). But, if you are investing in accomplishing bigger goals, then best would be to go with (3 years to 10 years).
Know the difference between cumulative and non-cumulative FD
There are two types of fixed deposit- One is Cumulative where the investors can reinvest their interest that is earned in between of the tenure. And the other is non-cumulative FD, where the interest can be credited in the regular interval.
Now, if you are a retiree who needs funds from time to time, the best choice for you would be cumulative FD. You can withdraw the interest when required.
Penalty for premature withdrawal
You must know that Fixed Deposits are the type of investment where you are allowed to use the money along with interest only after the completion of the tenure. Taking your money before your account attains maturity means you will have to start from scratch.
And, if somehow you are allowed to withdraw the money, you will be charged with a penalty.
Thus, make sure that you don’t take your savings out in the middle. If you are facing any financial emergency or in the legal case of CCJ, then you can go for external help. There are lenders in the market who provide CCJ loans with no guarantor in the UK.
Wrapping up, these were the major things that you must keep in mind while investing in fixed deposit. The more you will know about it, the better will be your chances of getting good returns.