Vital Reasons New Investors Should Consider Fixed Deposits

Bank Fixed Deposits (FDs) provide consistent returns and are accessible for use as and when needed. As a result, they are very liquid as an investment alternative and thus a favored investment choice for most investors.

If you are new to investing, FDs can assist you in planning for your short-term financial objectives. They are also suitable for meeting contingency needs or unforeseen expenses, such as a medical emergency or an unscheduled travel, because they offer a fixed interest rate.

Connect your savings account to a bank FD

You can save more efficiently by automatically transferring money from your savings account to a fixed deposit when the amount reaches a specified threshold. When your savings account balance reaches a specific threshold, the money can be automatically transferred into a fixed deposit. Fixed Deposits can be linked to your bank savings account, allowing automatic transfers to a fixed deposit.

Another option is to set up a recurring deposit from your savings account. This term deposit allows you to invest consistently, routinely, and systematically every month, teaching financial discipline. A fixed deposit rate calculator can determine how much the recurring deposit will be worth at maturity.

Consider your investment strategy and tenure carefully

Ideally, match the tenure of your bank FD with your financial aim. In addition, choose from alternatives such as the aggregate plan and monthly or quarterly interest pay-out plans, depending on your needs. For example, if you aim for a financial goal in 2 or 3 years and do not need cash in the interim, choose the cumulative plan, often known as the reinvestment of interest plan. If, on the other hand, you require cash for routine costs, such as paying utility bills, you might select the monthly or quarterly interest pay-out plan that best suits your needs. Use a fixed deposit calculator to determine how much you will receive in returns.

Use the fixed deposit laddering technique

This common strategy for investing in bank FDs can help you achieve high returns while also meeting liquidity needs.

It is important to note that you are not required to invest an identical amount throughout maturity periods; you may invest a larger amount for a time with higher interest rates. You can choose the maturity term (i.e., the tenure of your FD) and the amount to construct the ladder that best meets your needs. The crucial point is that if you have one FD maturing regularly, you will have the maturity profits available (for whatever purpose). Furthermore, the interest earned would be larger for longer maturities, allowing you to possibly make higher returns.

Continue to renew your bank FD

Renewing investments permits the force of compounding to continue and work to your advantage in building a larger corpus. When your bank FDs mature and you do not need the money right away, make it a point to renew the FD for a suitable tenure.

Avoid prematurely withdrawing from your bank FD

Avoid early withdrawals from your FD to maximize returns. Premature withdrawals would stifle the power of compounding and impede wealth accumulation. As a result, you may not be able to meet your financial objectives. Some banks do provide flexibility. Although the interest on bank FDs is taxable, it is a simple and effective approach to begin developing your investment corpus. You can also put money into a Tax Saver Fixed Deposit.

You don’t even have to visit a bank location to open an FD. For example, at RHB, you can open a fixed deposit account by submitting your basic information while sitting at home, in a cafe, in the office, or anywhere.