If you want to make a safe investment with guaranteed returns, you should consider investing in a fixed deposit account. This type of banking product can help you save money and earn interest income in the process. It is often considered one of the most reliable and secure forms of investment due to its fixed rate of return. However, many people have questions about what a fixed deposit account is.
In this article, we’ll discuss the meaning of a fixed deposit, its features and what role it plays in your financial planning.
What is a Fixed Deposit Account?
A fixed deposit account is a type of savings account offered by banks and financial institutions in which you can deposit a certain amount for a predetermined period at an agreed-upon interest rate. The funds are locked in for the term, which can range from one week to several years.
Features of Fixed Deposit
The interest rate offered by banks and financial institutions on fixed deposit accounts varies depending on several factors, such as the amount deposited, tenure, and prevailing market conditions. Typically, longer terms result in higher interest rates. Banks also offer higher interest rates for senior citizens, incentivising them to save more.
Unlike other market-influenced investments, FDs are known to have a secured investment option where you are offered guaranteed returns fixed when opening the account. So, even if the market fluctuates, you are offered guaranteed returns on your fixed deposit account.
Return on Investment
The return on investment in a fixed deposit account means you get to choose your interest-receiving period. So, you can either get the interest on your investments periodically or further reinvest in the interest, which is also called cumulative FD.
One of the most exciting features of a fixed deposit account is that you pick flexible tenures on your investment. So, you can choose how long you can open your fixed deposit account – from seven days to ten years.
Loan Against FD
Lastly, this fixed deposit feature allows you to take a loan against your FD savings, so you don’t have to break your investment before it hits maturity and welcome a penalty on an early withdrawal.
These are just some of the many features a fixed deposit account offers.
Check our blog to learn the in-depth benefits of fixed deposits.
What Role Do FDs Play in Financial Planning?
Fixed deposit accounts are some of the few investment options allowing you to form a corpus for saving. It also boosts your investment portfolio while making sure you are financially sound. Here’s how FDs help your financial planning:
With fixed ROI, FDs make your portfolio stable. Further, they are not subject to market risks, making them a suitable option for investors seeking less volatility and more persistence.
Improved Asset Quality
Long-term fixed deposits are some of the most high-quality assets, as you can borrow 80% of their value at a low-interest rate.
Available for Short Term
FDs are also available for short terms, making them of high liquidity and safe to fulfil your short-term needs.
Check out our blog – How Does a Fixed Deposit Work in India?
Freo Savings Fixed Deposit Account
With the constant need to invest and save for the future, fixed deposit accounts are known to be some of the most important investments as they offer high-interest rates with less volatility and higher return on investment. Freo Savings fixed deposit account is one such account where you can get the best FD rates in India – up to an 9% interest rate!
Open your gateway to saving and investment packed with benefits of lesser risk and volatility.
Is a fixed deposit a good investment?
Fixed deposits are known to be one of the oldest and most trusted investment instruments offered by banks and other financial institutions. They have higher interest rates than traditional savings or current accounts, making them an ideal investment option.
Which bank is best for opening an FD?
Freo, a neo bank, is one of India’s most trusted financial institutions that allows you to open a fixed deposit account with Freo Savings and earn up to 9% interest with other added benefits!
What is the difference between a fixed deposit and a savings account?
The main point of difference between a fixed deposit and a savings account is that a savings account has a variable interest rate, meaning its interest rate depends on the market condition. So, if the interest rate decreases, you won’t be able to benefit more. This is not the case with a fixed deposit, as the interest rate of an FD account does not depend on the market.
Learn more in detail: Savings Account Vs Fixed Deposit: What’s The Difference?