Try asking your grandparents about the most rewarding financial tool for stable investment, and they will probably tell you about a Fixed Deposit. That’s how traditional FD has been and still remains one of the reliable sources of investment today.
Depositing money in FDs paves the way for higher returns than savings accounts. With its interest-rich returns, flexibility and liquidity, FD encourages risk-hesitant investors to attain financial discipline and build a secure future. However, do you know the best way to maximise your returns is to remain invested through long-term FD? Explore this blog to know how long-term fixed deposits can benefit an individual in their financial goals.
What Does Long-Term Fixed Deposit Mean?
Fixed deposits involve investing a specific amount for a specific tenure. This time duration can be short-term, mid-term, or long term depending on the number of years. Typically, fixed deposits for 5 to 10 years fall under long-term investments. For example, if you are saving for higher education for your child, planning for retirement or buying a new house, long-term FDs are a clear choice. You can get much higher interest rates on them. Plus, they involve lower risk with assured returns.
Benefits of Long-Term Fixed Deposits
You can achieve your difficult milestones with a long-term fixed deposit. Here’s why they continue to be a preferred investment choice:
1. Securing Against Market Fluctuations:
The Indian money market can be highly sensitive, which can affect the rate of interest for any form of investment. However, Fixed Deposits are stable investment instruments that remain unaffected by market volatility. Your principal is secure, and returns are guaranteed regardless of market fluctuations.
2. Attractive Interest Rates:
Long-term FDs often offer attractive interest rates, especially for specific tenures promoted by banks. Some institutions provide higher yields for non-standard durations like 390 days, 700 days, or 24 months. This tiered structure helps maximise returns while meeting long-term financial goals.
3. Loan Facility Against FD:
Unexpected expenses can come up anytime, even when you are preparing for your long-term goals. In case of unexpected expenses, instead of breaking your FD and incurring penalties, you can take a loan or overdraft of up to 90% of your deposit amount. This allows you to meet short-term needs without affecting your long-term investment growth.
4. Advantages of Tax Savings:
Interest earned on FDs is taxable. However, it is important to note that certain long-term fixed deposits can have tax deductions, including the ones with a 5-year lock-in period. Under Section 80C of the Income Tax Act, individuals investing under a 5-year Tax Savings Fixed Deposit will get some tax benefits. Therefore, long-term FDs are the best choice as they help you to save up to Rs. 1.50 lakh per annum on taxes.
5. Ease of Auto Renewal:
Fixed deposit accounts are easy to open, manage and renew whenever needed, either online or by visiting the bank. Most of the banks offer auto-renewal options, allowing investors to continue their long-term investment seamlessly even after maturity. This works great for individuals who have a distant financial goal where it may not require monitoring deposits on a regular basis.
6. Withdrawal Option for Emergencies:
Although long-term FDs have longer tenures, they still offer premature withdrawal options in case of emergencies. However, doing so may attract penalties or reduced interest. This feature provides a degree of liquidity when needed.
Conclusion
Fixed deposits may not be the newest terms you will find in the investment market, but that is where lies its true advantage. They are traditional, predictable and growth-oriented, helping you achieve your long-term monetary goals. The best part is that anyone can opt for a long-term FD. Plus, whether you are a sole investor or an entity, it is for everyone. So, decide on the deposit amount, explore the interest rate options and make your investment!
