Are Fixed Deposits, The Best Investment Option?

This article is posted as Awareness on Personal Finance  part2, You can read part1(Investment options for beginners) , In continuation with the last article, I am here today to give a brief explanation about Fixed Deposits, In fact Fixed Deposits are the oldest form of Investments which are secure, I will be stressing about how to get most out of the fixed deposits 

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As All of you know that Fixed Deposits is a secure investment option with lesser returns in which you receive a interest of around 8-10% per annum and the condition is you have to lock it for a fixed period (7 days to 7 years or more).The Interest may be paid monthly, Quarterly,Half yearly or Annually basing on your choice and Company's policy. Longer the duration more is the interest, Bank Fixed Deposits are more popular in Villages and among Retired Persons as a good financial instrument to invest as they involve very less risk, and can easily be liquidated at your requirement.

Compound Interest will fetch you more Returns            
When You are investing in Fixed Deposits You should checkout the Compound Interest rate, i.e the rate at which compounding is done, i.e some banks offer fixed deposits with quarterly compounding, while others offer half yearly compounding, More times of compounding in a Year means more returns . So ensure to checkout what is the period taken to do compounding period of that particular fixed deposit

FIXED DEPOSITS INTEREST RATE COMPARISON

SL.no	BANK NAME	F.D PERIOD	(INTEREST)	Sr.citizen
1	DHANALAXMI BANK	400 days	9.5%	10%
2	CITY UNION BANK	1 year	9.5%	10%
3	UNION BANK OF INDIA	1-3 years	9.25	9.75%
4	BANK OF INDIA	555 days	9.25%	9.75%
5	STATE BANK OF HYD	1-3 years	9%	9.5%
6	AXIS BANK	12-18 months 1.5 to 5Years	8.5% 9%	9.25% 9.75%
7	ICICI BANK	1 to 2 Years 2 - 5 years	8.75% 8.75%	9.25% 9.50%
8	HDFC BANK	1-5 years	8.75%	9.25%
9	STATE BANK OF INDIA	1-5 years	8.5%	9%
10	HSBC BANK	365 years	7.75%	8.25%

MAIN FEATURES OF FIXED DEPOSITS.

1) You can Deposit for 6 months to 10 years.

2) Deposits in Banks or NBFC  up to 1 lakh is guaranteed by  RBI .

3) On almost all fixed deposits Sr. Citizens get 0.5% extra interest rate.

4) Based on RBI Credit Policy, The interest rates may fluctuate

5) Interest from Fixed Deposits which exceed an amount of Rs 10000/Annum are taxable  & TDS will be deducted by Banks too.

6) You can withdraw amount whenever you need but some percent of amount will be deducted as penalty (that means You can meet an urgency without fail)

7) Most of the Banks offer fixed interest rate till maturity. 

8) Sometimes if the interest rate is less than rate of inflation, You may withdraw money from fixed deposits and choose an another investment option.

9) You can also avail loan on your fixed deposits up to some percentage of your amount

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By taking into consideration of all the above factors, The investors who are aged between 20-45 should not invest more in Fixed Deposits as they provide less returns . Investors above 45 years should save their major portion of savings in Fixed Deposits 

When you are saving money for your child education or marriage, you should choose Equity or Mutual Funds as in long term these investment options will give more returns when compared to fixed deposits through which you can be inflation proof, But these investments are more risky in nature 

Author info:
This Article is written by D. Gopi Kishore who is into Finance and stockbroking.

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