There are innumerous areas you consider before investing your savings to get returns. However, the most secure and safest option for you is fixed deposits. This is because such deposits provide many benefits such as flexibility, guaranteed returns, and tax advantages.
Not to forget, opening a fixed deposit account is a systematic task, and there are various factors to look for, such as rate of interest, tenures, and withdrawals. To help you get the roadmap, here are the top tips to keep in mind before investing in such deposits.
What are the Factors Influencing Fixed Deposits?
Investing in fixed deposits is a widespread way of maximising your wealth and getting guaranteed returns in the long run. It is used by investors all across India. Below mentioned is a list of factors that influence returns on fixed deposits.
The period for which you invest in fixed deposits is directly linked to the returns you receive. Therefore, it is recommended that you invest in a fixed deposit for a longer duration to get higher returns.
Another major factor influencing returns on fixed deposits is your age. For instance, all financial institutions give an additional interest rate above the standard one, especially to senior citizens.
- Prevailing Economic Conditions
This includes the existing demand as well as supply inflow and outflow of the country. In the case of the smooth prevalence of such economic conditions, the demand for credit is high, and the country is developing. This, in turn, leads to banks offering higher interest rates on fixed deposits to meet the credit demand.
- Fixed Deposit Interest Rates
The interest rates given on fixed deposits vary from one financial institution to another. Broadly, there are two types of interest rates- Cumulative and Non-cumulative. In cumulative interest rates, the principal amount with interest is paid at the end of the maturity period. For non-cumulative interest rates, the interest amount is paid in intervals depending on the fixed deposit scheme you choose.
- Credit Rating of the Financial Institution
It is essential to ensure that the financial institutions you are investing in hold a good credit history. You can assure this by analysing the credit scores given by CRISIL or CARE.
- Principal Amount
The whole amount of initial investments plays a significant role in determining the interest rate applicable to your deposits. It is therefore recommended that you invest in fixed deposits of the higher amount to maximise your wealth.
Financial backup has become a necessity in today’s demanding lifestyle. To meet this requirement, you must invest in not just one segment but multiple areas such as fixed deposits, mutual funds, and real estate. A combination of such investment options will help you reduce the risks and increase your profits. By considering the parameters mentioned above, you can evaluate different fixed deposit schemes offered by various financial institutions. After such analysis, you can opt for the fixed deposit scheme which best suits your needs and support your financial goals. Go for an FD today.