It is that time of the year again, when we look into our finances, restructure our investments, audit our savings and think hard about the ways in which we can diversify our portfolio risk. There is no question that one of the most stressful parts of building a financial plan actually understands which instruments fulfill our needs. And the fact that almost every single person has some form of financial advice for you does not help the cause. But thanks to the internet, you can now make an informed decision with the help of the guidance and tips available.
While investments are mostly tailored according to our needs, wants, and goals, there are a few financial instruments that are essential for every portfolio. And one such plan has to be a Fixed Deposit (FD). While there is a lot that has been said about this traditional investment, it still stands as one of the smartest choices that need to be in your investment kitty whether you have been a long-standing investor.
The risk arbitrage
Fixed Deposits are one of the safest investment options, especially when you compare them with stocks or any other market-linked instruments. With low volatility, the corpus that you set aside in FDs serves as a great way to ensure that your capital is safe. If you are just starting out with different investment options, then investing the same amount as your capital is an easy way to arbitrage your risks and receive an assured amount at maturity.
The security of Fixed Deposits
In addition to the low-risk of the actual products, the safety of the funds can also be assessed based on the ratings provided by companies like CRISIL. The FAAA (F Triple-A) security level is the highest rating for financial instruments, indicating that payment of interest and principal is very strong. Looking for FD products with CRISIL ratings of ‘FAAA’ that also offer one of the highest FD interest rates is a great way of balancing your funds out without curbing your returns.
For the best of your interest
When it comes to Fixed Deposits, returns are one of the main aspects that most people focus on. However, with the recent market developments, the interest rates have been rising, making now a great time to invest in an FD. To add to this, the right FD product is bound to help you to get more out of your investment.
One can start early and multiply wealth with the power of compounding. Small amount can turn bigger with compounding; when the compounded interest is reinvested with the principal amount ranges from 6 months to 10 years Fixed Deposit. Cumulative Fixed Deposit is good for those who are not in need of regular interest payment as the interest is paid at the time of maturity in addition to the principal Cumulative Fixed Deposit schemes/compounding can, therefore, be known as money multiplier schemes. On the contrary, in a non-cumulative Fixed Deposit scheme, interest is payable at fixed frequencies.
The added benefits
In addition to all this, there are several other benefits of having FDs in your investment portfolio that come with the loan facilities that give you easier access to funds at the time of emergencies whether you are looking for security, surety or sheer comfort of returns and benefits. FDs fit all your needs, making them a must-have for every type of investor. Moreover, the universal nature of this instrument makes sure that it can serve a different purpose for every type of investor.