How to Invest in Fixed Deposits?

 

There are many individuals who think that investing in a fixed deposit is safer and more reliable to generate income. This notion is largely true as there’s lesser risk involved with fixed deposits. Fixed deposits aren’t a new phenomenon and have existed for years. People majorly use FDs as a retirement fund or collect them as emergency corpus.

Many financial institutions besides the top 10 stock brokers in India are finding it hard to generate the same amount of trust and a sense of relief amongst customers as in the case of fixed deposits. In fact, more people rely on making investments like fixed deposits than the clients of the best stock broker in India. Below is the list of steps to be completed for investing in fixed deposits.

Steps to Invest in Fixed Deposit-

Fixed deposits are the best avenues for parking your surplus money, ideally, it is the best option for preserving your capital at your discourse. You can easily start investing in FDs in the following ways.

Step 1- Checking and comparing the FD interest rates

Before finalizing an FD, you must first go through the interest rate offered by the company as the interest rates are highly varying. For instance, the small finance banks and the NBFCs offer higher rates of interest than commercial banks. Besides this, senior citizens get a marginal increase than the prescribed rate of interest.

The table below gives a fair idea about the rates offered to a normal beneficiary and a senior citizen for a period of 5 years.

Financial Authority        Normal Interest Rate    Senior Citizen Interest Rate

SBI                                     5.4%                                 6.2%

Axis Bank                          5.5%                                 6.15%

ICICI Bank                         5.5%                                 6.3%

 

Step 2- Choosing the ideal deposit tenure

An FD generally can range anything between 5 to 10 years. Based on your long-term goal and requirement you must choose a favorable deposit scheme. Financial experts suggest to ladder FD in such a way that it lasts for different tenures, providing better interest rates, and facilitating liquidity.

There are certain tax exemption norms where you can save tax under Section 80 C of the ITA if you invest in a 5-year-FD-plan.

 

Step 3- Choosing a frequency for paying out interests

After deciding the FD running tenure, you must now lay emphasis on the frequency you desire to receive your interest pay-outs. Most of the institutions offer you the following terms-

·        Monthly

·        Quarterly

·        Half-Yearly

·        Annually

Many people who don’t eye immediate earning generally choose to reinvest the FD. These options will help you reinvest your saving after being compounded quarterly and will be paid out after maturing along with the principal amount.

 

·        Step 4- Select mode of deposition

Now you must decide on how you want to deposit the payment with your financial institution. Many people opt for physical depositions or prefer depositions via internet banking.

FAQs

1.      What is the minimum amount with which you can open an FD account?

You’ll generally require a minimum of Rs. 1,000 for opening an FD account. This amount may vary for different banks and financial institutions.

2.      What is the maximum threshold amount of investing in FD?

There is no upper limit to FD account depositions. People can even deposit an amount of Rs. 1 Crore or above.

3.      What is the maximum and minimum duration for FD investment?

In FD accounts, customers can choose to make investments for as low as 7 days to longer durations of 10 years.