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Maximising Your Returns: Strategies for Investing in Fixed Deposits Effectively
Posted on Thursday, May 30th, 2024 | By IndusInd Bank
We all have dreams and long term goals in our lives. They could be, to own a car, travel overseas for a vacation, save funds to support our children’s higher education and countless others. A savings account may aid in fulfilling these goals, but this may not be the best way to increase your savings. It becomes important to invest your money in other financial products across the banking landscape. A fixed deposit(FD) is one such product that makes your hard-earned money work harder for you while you save towards fulfilling your dreams.
An FD allows your money to grow steadily over time. You invest a certain amount of money for a fixed tenure at a fixed interest rate, thus guaranteeing returns on your investment. There are certain strategies you can employ to maximise the returns you get when you invest in afixed deposit. Let’s take a look at some of these strategies that can help you get the maximum benefit out of your fixed deposit investment.
Strategies to Maximise Returns with Fixed Deposits
1. Choose the Right Tenure
The average interest rate differential between a 1-year FD and a 3-year FD in India can be as high as 1.5%. Therefore, it is important to choose the right tenure wisely, depending on the financial goals you want to achieve. For example, if you want to purchase land or property in the upcoming 2 years, it may not be a good option to choose a 5 year term. Similarly, if you are saving up for your retirement, the longer tenure may offer a higher interest rate and hence higher return.
2. Explore Fixed Deposit Laddering
Splitting up your money and then investing in FDs with different tenures is a strategy known as ‘fixed deposit laddering’. The varying tenures ensure that you can tackle your present financial situation wisely and achieve your goals without much hassle. For instance, you can split a specific sum into three different tenures: one with a one year maturity, another with two and the last one with three, each for a specific goal. This also ensures you can access a portion of the investment over a period of time.
3. Capitalise on Compounding Interest
Investing in fixed deposits offers you another benefit; your interest rate compounds over time. To benefit from this, you can always reinvest the interest you get and other earnings you have made over time back into the FD and see your money grow exponentially. With the power of compounding interest, you can have substantial gain over a few years.
4. Stay Informed
Interest rates determine the return that you get on your investment. Thus, it is important to stay updated about market conditions and economic trends that may affect fixed deposit interest rates. You can time your FD investments depending on favourable interest rates and make wiser choices when seeking to grow your money.
Choosing the right tenure, exploring fixed deposit laddering, capitalising on compound interest and staying informed about changes in fixed deposit interest rates can help you reach your goals with ease. Remember, even a small increase in interest rate can make a big difference over time. So, don’t let your hard-earned money sit idle; put it to work with a well-planned fixed deposit strategy.
Many banks, like IndusInd Bank, offer a user-friendly and safe online platform for opening FDs with a range of benefits like auto renewals, monthly/ quartely interest payout optiopns and tax saving if you opt for a 5 year Tax Saver FD. Open an FD online, take charge of your financial future and watch your money grow!
