Invest In FD: 5 important things to know before taking the right decision, you should also know

Fixed Deposit (FD) is one of the safest and most popular investment instruments available in the country. FDs can give you good returns, provided you are well versed about the product and gather all the information to maximize investment benefits. Most banks and many financial institutions offer the facility to invest in FDs. But how will you know which is the best FD product for you? Continue reading further to know the answers to all such questions, how long should be, in which bank to invest money.

SBI: Deadline for investment in special FD scheme extended, chance to get more interest till March 2022

How long should the investment be for?
FD tenors offered by banks and financial institutions usually range from seven days to 10 years. Some banks also offer FDs for longer tenures up to 20 years. But how do you know what period is right for you? The answer to this question lies in your financial goals. As long as your financial goal is, invest in FDs for the long term. For example, if you want money after 10 years of your children’s studies, then the period of 10 years will be right.

More money in one FD or a little money in many smaller FDs
Deposits in banks up to Rs 5 lakh are insured by the Deposit Insurance and Credit Guarantee Corporation, a subsidiary of RBI. So to completely eliminate the default risk, when you invest in FD, do not invest more than Rs 5 lakh in a single bank. A better approach would be to split your investment into different FDs in different banks.

Floating vs Fixed-Rate Term Deposits
Floating Rate Term Deposits (FRTDs) are investment products that offer interest rates linked to an underlying reference rate (RBI repo rate, 91-day treasury bill rate, etc.). So when the reference rate increases, the linked FRTD interest rate also increases. As this decreases, your interest rate also decreases. This is not the case in regular FD. The interest rate remains constant till the completion of the booked period.

Corporate FD or Bank FD
This is the most important question. If you want a higher interest rate by investing in FDs, you can invest in Corporate Fixed Deposits. The investment period usually ranges from six months to five years. But if you are a risk averse investor, it is better to invest in FDs of reputed banks. Because you will not get any money when the company goes down.

Should I wait for the maturity of the FD or not?
Breaking FD may not be a good idea. Especially when there is a possibility of a fall in the interest rate in the near future. If you break the FD in such a situation, you may not get that much interest if you reinvest in the near future. You can take an overdraft on the FD to meet your needs instead of breaking the FD.