Why are fixed deposits considered safer than other investment options?

It is necessary to invest a part of your income. Investment helps to build a reserve for financial emergencies and plan for retirement as well. Additionally, by investing, you can make your savings grow at a rate that inflation cannot beat. Many investment solutions can help you achieve these financial goals. Most investors select instruments with lower risk, including fixed investment options such as PPF, fixed deposits, and government schemes. 

Although products like stocks and mutual funds offer lucrative returns, these are market-linked products. They carry the risk of fluctuating returns and can lead to losses. Conversely, FDs are not volatile as per market variables and carry a lower chance of risk with them. 

With many low-risk financial instruments available in the market, here are some reasons that make fixed deposits safer than other investment options.

1. FDs help to inculcate the habit of savings

Due to a fixed lock-in period, FDs limit the unnecessary withdrawal of your money until maturity. When you invest in mutual funds or park your funds in a savings account, you can withdraw them at any time, which doesn’t work in the right direction of wealth appreciation. 

Since you have restricted access to your money, you can save more. You can also benefit from the power of compound interest, which increases earnings to your principal and enables you to earn more money. 

2. FDs offer attractive rates of interest

High FD interest rates allow you to earn more. Even if you opt for a short-term tenure of a few months, you have the chance of earning more than what you would have from a savings account or market-linked products. 

3. FDs are not subject to market fluctuations

Fixed deposit returns are not influenced by market variables. Thus, your hard-earned money is safe. Before investing, you can use the fixed deposit calculator to estimate your returns. It can help you better plan your finances and chalk out a clear roadmap on the way to grow your savings. 

4. FDs let you earn from periodic interest payouts

With a fixed deposit, you can earn periodic interest payouts. These payouts let you plan expenses at your convenience. The most prominent advantage of periodic interest payouts is in your post-retirement years when a monthly income helps to meet regular expenses. 

You can select a non-cumulative FD for monthly, quarterly, semi-annual or annual payouts. These help you earn regular interest payouts. Alternatively, you can opt for a cumulative FD that lets you gain total interest earnings at maturity. 

5. FDs offer interest rate benefits for senior citizens

The interest rate for a savings account or rate of returns for mutual funds stays the same, irrespective of the holder’s age. A fixed deposit offers a higher rate of interest to senior citizens. 

The bottom line

FDs are excellent instruments to grow your money with guaranteed returns, flexible tenures, and the investment protection of a fixed-income instrument. 

If you want to meet your financial objectives with smart wealth and investment management services, head on to the Tata Capital Moneyfy app.