One thing which has become the most important thing for survival after oxygen is money. To keep it the money safe is also your prime responsibility, which can be done by investing it. Fixed Deposit has become popular among the people to invest the money, as it gives the best returns and is risk-free. A fixed deposit is a financial instrument provided by banks or NBFCs which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. The best-fixed deposit plan is the one which gives you the highest interest rate until the FD gets matured and also safe on the other hand. Recently few concerns have been raised about the safety of money kept in fixed deposits, to lift over that concern here are few points which you should follow as it will give you the maximum benefit and keep your money safe.
To achieve the right balance between risk and return, do laddering deposit. Laddering is a strategy in which an investor divides a sum of money into multiple FD in various banks. This strategy helps in getting a higher rate of interest. For example, you have invested Rs. 2 lakh in a one-year fixed deposit with SBI, another 1 lakh in a two-year FD with Axis bank and third deposit of Rs. 1 lakh for 5-year maturity period with HDFC bank, the interest rate of the all the banks will be different. This means you have invested all your funds in five different FDs, each maturing one-year apart. This will mean that in case you need to break the FD due to emergency, you will not have to compromise on your investment term as the FD amount will be small and you won’t lose much. It is also advisable to have a joint fixed deposit account with any of your family members so that in case of emergency they can get the money.
True, that fixed deposit is the risk-free investment but you also need to know that there is nothing called safe in today’s time. Almost every investment plan is associated with some risk. It is important for you to understand if your plan carriers risk, if yes how you can minimise them. To reduce the risk of liquidity, split the FD accounts in the name of different family members. Also, before you make a decision, invest in a bank which offers 40 to 50 basis points (bps) or higher than this. Use State Bank of India’s SBI FD rates as benchmarks.
The banking sector is seeing turbulent times for some time now, few incidents have happened where people have lost money from there deposits. Considering all the factors it is advisable to not only invest in private sector banks but also allocate some funds to the non-banking finance companies (NBFC) and PSU banks, where bonds or other long term borrowings carry a higher rate of interest.
You can have sleepless nights as 90 per cent of the FD accounts in India store less Rs 5 lakh. As the government of India has recently raised deposit insurance from Rs 1 lakh to Rs 5 lakh.This way if you invest Rs 5 lakh in four different accounts then you can cover up to Rs 1 crore from deposit insurance.
Bottom line: The diversification in the investment plan like investing in more than one bank, allocating FDs to different family members and not only investing in private banks will help you meet your financial goals by reducing the risk factors.
