Investing in market linked instruments is advised for accomplishing the goal of wealth creation. While this is a sound recommendation, just like with any financial undertaking, you should look into a few things before going ahead and investing blindly. Factors like lock-in periods, investment security, and potential yield greatly influence how your portfolio will perform, and directly impact your financial planning. Identifying investment options that align with your risk profile and goals is a smart place to start. However, a financial portfolio also requires balance.
You should also attempt to incorporate balance through instruments that are a lot more stable than the typical market investment. One such instrument is the fixed deposit. Fixed deposits are not only incredibly stable, but they can also offer generous returns, provided you pick the right issuer. Fixed deposits can be tailored to your liking in terms of duration and yield. Your investments can only become more secure with an instrument like a fixed deposit, which offers the necessary savings — be it for a targeted goal or as an emergency fund.
To delve into the significance of fixed deposits, let us understand a few ways it benefits a financial portfolio.
Flexible Tenure
Lengthy lock-in periods can be hugely restrictive for investors. They restrict the liquidity of your investments. Lock periods determine how long your funds are parked for without you having any access to them, barring certain conditions. With a fixed deposit, however, you can align this illiquidity with the duration of your choosing. You have a lot of flexibility when it comes to picking how long your funds will remain parked. This further aligns with your investment goals.
Balances Out Risk
While financial instruments bring inherent risk with them, the amount of risk is much higher for market-linked instruments. Low risk might make them viable options for some — particularly retirees and senior citizens, who want the security of their funds to be accessible and assured. With a fixed deposit, you are guaranteed of your return on your investment, be at FD interest rates of 6% interest per annum, or 7%.
Your deposit will be immune to the risk of market fluctuations. You will earn interest as promised. This makes for a balanced portfolio as market fluctuations can cause a fall in returns and a fixed deposit can compensate for it.
Opt for Liquidity
Although fixed deposits come with a lock-in period for the purpose of growing your savings, you have the option to prematurely withdraw your investments, or take a loan against your fixed deposit. A third option that many are not aware of is choosing regular payouts. If you want to supplement your salary and are looking for a monthly income stream that is liquid, you can do so with a fixed deposit. You can take advantage of liquidity at periodic intervals by laddering your FDs smartly, without the risk of added costs or losses. This feature does not come with all instruments, giving FDs a unique advantage to capitalize on.
Attain Financial Goals
Taking charge of your financial portfolio — in terms of risk reduction, improving stability, and guarantee returns — was never easier than through a fixed deposit. In fact, fixed deposits facilitate financial planning because of the way they operate. You have almost negligible risk attached to your investment and the tenure and amount invested are set by you.
If you have a medium-term financial goal, starting a fixed deposit years-in-advance guarantees you of receiving the funds that will help you attain that goal in the future. Many people use a fixed deposit for goals like saving up for a future wedding, family vacation, college education, and more. In fact, you can also use any online FD Calculator to determine the returns you can get, before you invest in a Fixed Deposit. This can help you with planning finances better, so you’re better prepared for your financial goals.
With all the advantages it brings, a fixed deposit is practically indispensable to a financial portfolio. It strengthens a portfolio by balancing out risk. It helps you attain your financial goals by making you choose a tenure, investment amount and providing guaranteed returns. It can serve to strengthen financial planning through the smart option of periodic payouts if you require an income replacer.
Investing in a fixed deposit is also easy, with the likes of Bajaj Finance online FD offering additional rate benefits and an end-to-end paperless process that helps you invest from the comfort of your home. Make a smart choice by investing in a safe fixed deposit that helps you grow your savings easily, without any effect of market fluctuations.
Follow our WhatsApp channel
