While planning finances, we look for options providing the right security and guaranteed returns in the short or long term. Before making an investment decision, it is important to consider different aspects, like risk appetite, liquidity needs, investment horizon, and goals. A Fixed Deposit is considered a popular investment choice for many Indians.
It is easy to comprehend and is the best way to create savings at a low risk. Fixed Deposits made for a specific tenure earn a fixed applicable interest rate. You can open them in varied tenures, like short-term, medium-term, and long-term. The short-term one ranges from seven days to 10 years. Long-term deposits are generally active for five to 10 years or longer.
When compared to Savings Accounts, the FD interest rates are higher. As there is no market involvement, the risk factors are extremely low. Thus, it is the best investment option for amateur and senior citizen investors.
What is a Long-Term FD?
They are a type of Deposit Account wherein the investment tenure can fall between five and 10 years or longer. Long-Term FDs work like Regular FDs and offer a higher liquidity with profitable returns. You can open them easily by downloading the Banking app. The overall process is transparent, short, and easy to understand.
What is a Short-Term FD?
It is a Deposit Account wherein you can invest funds for seven days to two years. Short-Term FDs let you invest money in the account and let it multiply for a short tenure. They are best for accumulating a sum for a shorter period. For three-month or one-year FDs, the interest rates are stable and are usually double the Savings Account interest rates.
Benefits of Long-Term FD
- You can invest in a Long-Term FD with different maturity terms depending on your suitability.
- The FD Account is auto-renewed immediately without getting into any extra formalities.
- FD schemes like five-year FDs offer decent liquidity to investors and can be used as a financial backup during emergencies.
- Five to 10 years FDs are beneficial to achieve long-term financial goals like buying a new vehicle, making a down payment on a home, etc.
- Long-term FDs offer an attractive high interest rate of 6% to 7% and guarantee a return on maturity.
Benefits of Short-Term FD
- The tenure of Short-Term FD can range from seven days to two years.
- The minimum deposit amount varies between banks.
- Opening Short-Term FDs on the Banking app creates small savings to achieve short-term financial goals like purchasing a gift for a family member.
- These offer no liquidity. Thus, it is advised not to withdraw this amount until the end of the tenure.
You can use both FDs to achieve different goals and create a strong financial cushion. Follow a disciplined investment approach to enjoy its long-term benefits.