A guide to growing your wealth through an FD

[Abhilash Rathore]

Fixed Deposits are usually a popular investment option among seasoned and new investors. They offer financial surety to individuals, a dependable way of growing hard-earned funds, and a symbol of consistency during continually changing markets and financial uncertainty. Let us learn more about this investment and explore how it helps grow your money.

Overview of FDs

When you open an FD, you lend money to your bank. In return, they offer you an annualised Fixed Deposit interest rate that remains consistent during the term of your deposit. You can also select the tenure of your FD based on your monetary goals. Once the tenure ends, you receive the money you invested besides the compound interest.

When you open an FD, you can also receive the interest you earn periodically, i.e., annually, monthly, quarterly, or half-yearly. FDs offer numerous benefits to investors:

• They are often considered the safest investment.
• They are considered low-risk since they are not influenced by market fluctuations. Hence, they can be a safer choice for conservative individuals.
• They offer a regular income source. This is because the interest can be paid out on an annual, monthly, quarterly, or half-yearly basis, depending on your preference.
• FDs usually have a lock-in period. However, besides Tax-Savings FDs, you can prematurely withdraw most FDs. However, you should pay a small penalty.

Ways by which FDs help grow your funds

Here are a few ways FDs help grow your money:

• Reinvest your interest

Reinvest the interest you earn from your FDs. You may add the interest to your current FD principal or reinvest it into another FD rather than withdrawing the money. This helps your investment to increase exponentially in the long run due to the compounding effect.

• Opt for more than one FD

Investing in multiple FDs can lower the risk and boost returns. Divide the investment amount into more than one FD with various tenures and interest rates. This helps create a balanced portfolio that generates consistent income. You may also want to manage your assets to best suit your requirements and financial objectives.

• Search for higher interest rates

To optimise the returns from FDs, look for a bank offering competitive interest rates. Selecting higher interest rates usually results in greater profits during the duration of your FD. So, before opening an FD, compare the rates various banks offer. You can also use an FD calculator to compare the interest earnings and maturity amounts of various FDs.

Conclusion

FDs are usually considered a reliable long-term investment solution in India. They offer several benefits. You can also check various methods that let you grow your funds through an FD, including higher interest rates, reinvesting the interest you earn, and more.