Fixed Deposit-Think Before You Invest

Fixed deposit-think before you Invest

Traditionally people of India put their savings in bank as a fixed deposit or postal schemes as these show up a safe and secure side for their money but with lesser returns and liquidity. If you want to get higher returns of your investment, then you have to take higher risk on the other hand, if you choose low risk investment then you have to compromise with lower returns or non-liquidity of your investment. In India, most investors are ready to compromise on returns therefore, it results into huge amount of inflow into fixed deposits year by year but before investing in fixed deposit you must consider these factors in your mind.

Liquidity- but at your cost

Fixed deposits provides liquidity means you can break your fixed deposit whenever you are in need before its maturity but if you break your fixed deposit prematurely, then you will get lesser rate of interest than the rate of interest you will be getting on its maturity.

Limited to 1 lac

The maximum amount of money you can invest in fixed deposit is limited to 1lac rupees only and this is unrevised since long.

Risk of re-Investment

Renewing your fixed deposit again and again for a longer period of time as you are not sure when to corpus is a good example of bad planning and FAIL TO PLAN IS A PLAN TO FAIL.

Return v/s inflation

Interest rate and inflation rate go hand-in-hand but talking about the long term scenario fixed deposit post tax cannot beat inflation. Taking calculated risk can help you beat inflation and will provide you an edge for your long term goal for children’s education or your retirement plan.

Fully taxable income

Investing in fixed deposits and postal scheme are subject to normal rate of tax depending on which tax slab you belong to so before investing take a look at post-tax returns and the gross return offered to you. Tax planning can help you save a huge amount of income tax which can help you in achieving your future goal.