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Five Advantages of a Fixed Deposit

5 MinsApril 19, 2019

A fixed deposit is a steady financial product that helps you save money in a stress-free manner

A Fixed Deposit (FD) is a financial instrument that delivers a fixed rate of return until maturity. It offers a higher rate of return than a regular savings or a recurring deposit account. It’s one of the most favoured financial products in India. Fixed deposits are often the first and the last financial instruments for most investors. We start our investment journey by opening an FD, and we spend our retirement years living off the interest that our FDs generate.

Fixed Deposit

Below are five advantages of a Fixed Deposit:

  1. Assured Return: Fixed Deposits guarantee an assured rate of return that is higher than that on savings accounts. This means that it does not matter what the stock market does or how the outside world behaves, an FD gives you the interest that you signed up for when you opened it. Digital savings account or regular savings account offer an interest rate of 3%, while Axis Bank Fixed Deposits fetch upto 7.5%* interest per annum. You can deposit as little as Rs. 5,000. Click here to know more about Axis Bank Fixed Deposits.

  2. Solid Hedge: Fixed Deposits are a very good hedge against other volatile forms of investments like stocks, mutual funds and gold. While it is true that stocks and mutual funds give a higher rate of return than FDs, they carry an element of risk since they are market-driven. When you invest in equity, it is important to balance it out with safer instruments. Fixed deposits are your best hedge against the volatility in the equity markets.

  3. Liquidity: Fixed deposits can easily be converted into ready cash in case of emergencies. If you have an online account, FDs can be liquidated within minutes. Axis Bank doesn’t charge you any penalty if you withdraw up to 25% of your FD pre-maturely. Beyond 25% however, you may be charged a small penalty. Banks also offer loans against FDs. You can be certain that you will always have emergency money when you need it.

  4. Perfect instrument to park your funds: This is the end of the financial year and if you are a salaried professional, you may be getting your year-end bonus. While you plan what to do with this amount and where to invest it, why let it sit in your savings account? Instead open a short-term FD and let it earn higher interest. You can open an Axis Bank Fixed Deposit for as low a tenure as seven days. The additional advantage of doing this is that you are ensuring the bonus does not get spent in irrelevant splurging.

  5. Flexibility: Fixed Deposits let you decide the tenure for your money. Different FD tenures have different interest rates but all of them are over the regular savings account rate. You can also choose the payment tenure for your interest. You can choose to be paid monthly, annually or on maturity. The flexible payment tenure is a great help to retired people as it gives them a regular income. You can also opt for an auto-renewal, which ensures that the FD gets renewed automatically till you actually need the money.

All these advantages make FDs, Tax Saver Fixed Deposits, Digital Fixed Deposits a must have option in your portfolio of savings and investments

Disclaimer: This article has been authored by The Source, a Mumbai-based content creation and curation firm. Axis Bank does not influence views of the author in any way. Axis Bank and The Source shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.