When you create your financial portfolio, protecting your capital is a priority and as such Fixed Deposits are essential. HDFC Fixed Deposits give you capital security and assured returns. So, investing at least 25% of your total capital in Fixed Deposits provides stability to your portfolio.
Let’s discover three situations when Fixed Deposits give you higher returns:
1. HDFC Fixed Deposits offer Higher Returns than Savings Bank accounts.
The current interest rate for HDFC Savings Bank accounts with deposits below INR 50Lakhs is 3.5%. For amounts between INR 50Lakhs and 500 Crores, you get a 4% interest rate.
However, depending on your investment term, HDFC Fixed Deposit interest rates range from 3.5% to 7.75%.
As you’ve seen, HDFC Fixed Deposits give you higher returns than Savings Bank accounts.
So, if you don’t need your funds for the next 15 days or more, you could enjoy higher returns by investing in a Fixed Deposit instead.
HDFC Fixed Deposit interest rate for senior citizens is 0.25%. Some banks also offer higher interest rates to senior citizens.
Cumulative Fixed Deposits give even higher returns than Regular Fixed Deposits. When you reinvest your interest, your principal amount increases every year. You earn compound interest instead of simple interest.
2. During Market Downturns, your Fixed Deposit interest rates could overtake your Equity Returns.
Equity investments give you higher returns than Fixed Deposits. However, that might not be the case every time. Equities are subject to market fluctuations and their inherent nature is such, your Mutual Fund NAVs tends to go up and down from time to time.
However, HDFC Fixed Deposit interest rates don’t get affected by variations in the market.
The changes in the government's monetary policy could bring about changes in the interest rates. Yet, when the RBI lowers the repo rate, the new interest rate applies to your new Fixed Deposits. Your older HDFC Fixed Deposit interest rates don’t get affected.
Let’s consider market performances in the year 2018 as an example. While the Sensex grew only by 5.12% and NIFTY by 2.2%, a one-year Fixed Deposit investment gave you an annual return of 6.5%. Hence, when markets are down, your Fixed Deposit interest rates could be higher. These high returns help you maintain a more stable valuation during market downturns.
3. Corporate Fixed Deposits give you higher interest rates than PPF Accounts and NSC.
Based on your investment term, Corporate Fixed Deposit interest rates range from 7.25% to 12.09%. Some offer senior citizens 0.25% higher interest rates.
However, PPF (Public Provident Fund) and NSC (National Savings Certificates) give about 7.9% interest. Many Corporate Fixed Deposits give you higher returns than NSC and PPF schemes.
When you invest in Corporate Fixed Deposits, choose schemes with excellent credit ratings. If the company defaults, you will not be able to sell your Fixed Deposit documents to recover your money. So, do some thorough research before you invest.
Corporate Fixed Deposits have higher premature withdrawal charges. So, be sure of your investment tenure. Furthermore, any interest you earn above INR 5000/- get taxed as per your income tax bracket.