Facts To Know Before Investing In Fixed Deposit

Placing money in a fixed deposit account has been instrumental in determining financial stability for people. With its promise of slow but sure returns, fixed deposit has gained an important place in the school of financial management. Monetary planning is as essential for an individual as salt to the human body. Today, the financial industry has been flooded with numerous investment schemes and plans. While investing money in the initial years of your life should be a mandate, adhering to precautions while choosing investment plans is crucial too. Safety is one of the main reasons as to why people still believe in keeping their money in FD. After all, FD is better than stifling money in a conventional savings account or squandering away in some dubious investment plan, in the hope of quick and large returns!
Fixed deposit is also known as term deposit. The money parked in a term deposit gets locked for a stipulated time period. The minimum tenure is 10 days while the maximum is 5 years. Interest rate offered is 8.75%. However, in case of a senior citizen the rate of interest gets increased by 0.5%.rnHowever, fixed deposits have their own flip side too. And, certain precautions need to be taken before you decide on opening FD account. Usually fixed deposits remain secure and safe only when they have been placed in large banks. So, make your investment wisely. Here are some precautions mentioned which will ensure safe investment in FD.
Choose Banks Instead of Private Companies
rnFixed deposit accounts with private companies involve risk and there is no security for your money. Do not fall into the trap of meaty interest rates, which companies usually offer so that people invest into them. If the business fails or gets into hot water, your money also gets lost. So, choose banks or financial corporations.
Avoid in Case of Urgent Financial Need
If you have an urgent requirement of money, do not rely on the returns of fixed deposit. This kind of investment requires time and patience. There is no promise of get-quick-rich; the longer you keep the money locked in a term deposit, higher the gains will be.
No Redemption Before Maturity
The money once locked in a fixed deposit for a stipulated period of time, cannot be redeemed before its maturity date. In certain conditions if you do break the FD, banks and financial institutions charge you penalty.
Interest Rate is Changeable
Although opening fixed deposit account in a trusted bank is extremely secure, interest rates still get affected by market rates. So, during inflation the usual 8.75% of interest rate which you earn on FD can get changed. This could possibly lead to lower returns at the time of maturity of FD, causing you unnecessary disappointments.
Invest in Monthly Plans
The amount of money which is earned on a fixed deposit (FD) also depends on the bank. Certain banks compound interest on the FD money, on a monthly basis while others do it on a quarterly basis.
This system largely determined the amount which you will receive after date of maturity. Hence, choose a bank or financial institution which works on a monthly basisrn