Investing in higher return yielding securities may involve a lot of risks. Various financial instruments like mutual funds, stocks, bonds, etc. are among the available alternatives. But all these instruments do not have the much-assured stability that a fixed deposit offers. A fixed deposit is a form of term-based investment wherein a specified amount is invested for a defined period. The FD rates for these schemes are higher in comparison to a savings bank account and do not involve any risk.
The fixed deposit eligibility enables most people, including corporate entities to have a secure and stable investment of their principal amount. There are a plethora of investment choices when it comes to fixed deposits. Not limited to banks, non-banking finance companies (NBFCs) are also authorised to accept fixed deposits. Listed below are some tips that can help you maximise your investment in fixed deposits.
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#1 Comparison is the key
With NBFCs authorised to accept deposits, fixed deposits need not be purchased from banks only. Moreover, you have the option to choose one with the highest fixed deposit interest rates. But you should remember that FD rates should not be the sole determinant of your purchase decision. Other factors like credibility also come into the picture to support your investment. For instance, Mahindra Finance fixed deposits with its FAAA credit rating by CRISIL is one of the leading NBFCs with strong credibility. At the time of shortlisting, make sure to look for the financial institution that pays not only a high interest rate but also has a higher credit rating.
#2 Bifurcate your investment
Bifurcation of your investment helps to have liquidity and still earn high returns. This can be done by breaking down the entire investment amount into equal parts and then investing each part for a different tenure. Moreover, you need not invest all of your hard-earned savings in one financial institution but can also leverage among the riskier ones with a higher interest rate. Further, anytime you require money, you need not break the entire deposit but only withdraw some portion and avoid penalties on all such investments.
#3 Investment in multiple FDs
Continuing the above point of bifurcating the investment, interest for an FD changes based on the tenure and also the amount of investment. So, investment in multiple fixed deposits can help to maximise the returns as well as not require you to compromise on future liquidity needs. Moreover, the FD rates are revised periodically. This way, investing for different tenure can also help to take advantage of these changing fixed deposit interest rates.
#4 Reinvest your interest
Reinvesting your interest earned can help you earn a higher amount at the next maturity. This has a compounding effect wherein you earn on your already earned amount from the previous tenure. This results in a much higher maturity amount.
Remember the above tips can help you gain higher returns. There is no better choice than a fixed deposit to earn competitive returns with almost no risk for the investment.