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What are the Top 5 Benefits of Adding Fixed Deposit to Your Portfolio?
Posted on Thursday, November 4th, 2021 | By IndusInd Bank
The economic fallout of the COVID-19 pandemic has taught us all the value of saving for a rainy day. But while saving is critical to building a financially sound future, it does not make sense to rely on savings alone. Instead, if you have already managed to set aside savings, you should seriously consider ways to make your money grow over the passage of time. Today, the most widely-known investment options are mutual funds, fixed deposits, Public Provident Fund, and Direct Equity, among others. Though many millennial investors today choose market-linked instruments like mutual funds, there are several reasons to make Fixed Deposits – arguably the most trusted financial product in India – a part of your investment portfolio. Here are the five most compelling benefits of including fixed deposits in your investment portfolio:
Guaranteed Returns
Unlike an investment in the volatile stock market, a fixed deposit comes with assured returns. When money is invested in a fixed deposit, you are already made aware of the amount you will receive at the time of its maturity. Irrespective of the fluctuating rates of interest and how the economy fares, the returns will be as per the fixed deposit interest rate that was agreed upon.
Reduced Portfolio Risk
Every asset category – gold, stocks, fixed deposits, equity – plays a different role in your investment portfolio. So, while an instrument like mutual funds brings growth potential to your money, a fixed deposit, with its guaranteed returns, brings a measure of stability to your portfolio.
Easy Access to Loans & Credit
A fixed deposit can come in useful during unforeseen financial emergencies. You may easily take out a loan against your fixed deposit whenever you need funds. The sanctioned amount is typically between 70-95 per cent of your accumulated fixed deposit amount, though this may vary from bank to bank.
Flexibility
Hard times come without warning. A fixed deposit can prove to be a real saviour during such times as it allows you to withdraw funds prior to maturity. Though you may have to pay a small fee or penalty, there is no hassle involved and the process is fairly simple.
Additionally, a fixed deposit lets you choose between non-cumulative and cumulative interest rates. Opting for the former means you receive quarterly or monthly payouts – so you can pay bills and EMIs out of the interest income – and choosing the latter means keeping your savings locked up until the tenure ends. This way, you gain from the compounded interest.
Tax Benefits
The Fixed Deposit interest or the return you get from your Fixed Deposit is exempted up to Rs. 10,000 in one financial year. Additionally, a tax-saving fixed deposit account – with a lock-in period of 5 years – is exempted under section 80C of the Indian Income Tax Act, 1961, offering relief of up to Rs. 1.5 lakhs per annum.
As illustrated above, a fixed deposit can make a great addition to your investment portfolio. It is also ideal for meeting short-term financial goals that you wish to meet within a certain timeframe, for instance, a family wedding or the education of a child.
If you are keen on making a fixed deposit a part of your investment plan and are looking for a high fixed deposit interest rate, multiple options for interest payment, and a flexible tenure, a fixed deposit with IndusInd Bank is your best bet. With hassle-free instant booking, you may book your fixed deposit online at the click of a mouse. Secure your savings with a fixed deposit today!
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author 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.
