How to make the most of rising FD rates: Fixed deposit i.e. FD is a safe option for investment. The recent surge in FD rates has prompted investors to rethink their fixed income investment strategies whether they should park their money or withdraw it at higher rates and deposit it in a long-term investment option. Many such questions arise in the minds of investors regarding the increase in FD interest rates.
Some banks have already increased FD rates and may announce the same in the coming days. Apart from this, there are many options in FD and investors should know how to use them for their benefit. For example, there is a special FD in which you get higher returns on investment. By taking the right steps, higher returns on FD can be achieved. Here are some methods for that, let us know about it..
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Understand fund needs
Before making any kind of investment, you should consider your financial target once. Before using your savings, think about short-term and long-term financial goals like buying a house, children's fees, retirement planning. Once the target is decided and you understand your risk appetite, you can proceed with any investment option.
Choose bank FD scheme wisely
Keep a close eye on FD interest rates of various banks and financial institutions. If there is an increase in the FD interest rate of any bank or financial institution, before investing, compare between the available options and choose the reliable bank offering the highest interest on FD for investment.
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Check lock-in period
Before investing in FD, check the lock-in period on the chosen scheme. Lock-in period details are linked to the tenure of the FD investment option. If interest rates are expected to increase further, then choosing an FD option that matures in a shorter period of time may be a wise decision. This strategy allows you to reinvest in a scheme that offers higher returns when the existing FD matures.
Keep an eye on special FD
Banks often offer special FD schemes. Higher interest is available on these. In such a situation, these schemes attract most of the investors. Investors should keep an eye on such schemes but before investing money, they should understand the terms and conditions of the special FD. Some special FDs come with special criteria that may not match the financial goals of the investor.
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Adopt a laddering strategy
You can adopt laddering strategy on FD option. This involves distributing your investment across multiple FDs with different tenures. As the FD matures, you can withdraw it and invest in a scheme that gives maximum returns. By doing this you can get more benefits.
Keep an eye on your investment portfolio
Review your investment portfolio regularly and make adjustments as necessary. If interest rates increase, you can transfer a part of your investment to those schemes. These steps taken from time to time prove helpful in keeping the portfolio in line with your financial targets.
Keep an eye on this too
When looking at FDs, it is important to consider the impact of inflation on real returns. Inflation destroys purchasing power and FD investment options may not always yield high returns. To preserve the value of your money over time, adjustments should be made to inflation rates and investment options.
(Article: Sanjeev Sinha)