Benefits Of Adding Fixed Deposit To Your Portflio

India is the country of savers and risk-averse investors who prefer stable returns & safety on their investments, and thus for generations, the fixed deposit remains one of the most popular investment instruments for savings. However, this trend has somewhat become shaky with the declining rates of Bank FDs. Regardless of this fact, it is still a good option to include it in your investment portfolio, and here is why!

What is a fixed deposit?
FD or fixed deposit, also known as term deposits are investment instruments are provided by both banks & non-banking financial institutions ranging from 7 days to 10 years. They provide fixed returns over a fixed period of time.

Reasons why you should add a fixed deposit to your portfolio
Reduces the portfolio risk: Different instruments in your investment portfolio fulfills the specific functions. For instance, equities give your money the growth potential over a long period of time. On the other hand, a fixed deposit ensures that there is a minimum swing in your investment portfolio. It helps the investors to earn stable income on their investments. 

Why is a fixed deposit considered one of the safest investment options?
The investments in bank fixed deposits are insured up to Rs. 5 Lakhs by DICGS. DICGS or Deposit Insurance and Credit Guarantee Corporation is a subsidiary of RBI and protects your fixed deposits.

The rate of interest on fixed deposits remains fixed throughout the investment tenure.

Fixed Deposits are a good option for short-term as well as long-term goals:
Consider this example for better understanding: You want funds of Rs. 10 lakhs in 5 years, then investing in a fixed deposit is an ideal option given that you know the exact tenure and amount. So, you can open a fixed deposit for ten years.

Similarly, if you want to buy any electronic gadget or plan a trip after one year, then you can open an Fd for one year. It will help you to get guaranteed returns on your investments. 

Getting tax benefits on fixed deposits:
There are multiple ways to save taxes on your investments. 

You can invest your money in a tax-saver FD. A tax-saver FD is a type of fixed deposit with a minimum tenure of 5 years. Under Section 80 C of the Income Tax Act, you can get tax exemptions up to Rs. 1.5 Lakhs on the principal amount of investments.

If you have invested in a regular FD, you can save TDS on your FD in such a way that interest on FD does not exceed Rs. 10,000.

Surety of returns on maturity:
As discussed in earlier points as well, one of the advantages of fixed deposit is that you are well acquainted with the amount that you will receive on the maturity of your investments. Despite any market fluctuations or the performance of the economy, you can get guaranteed returns on your investments in a fixed deposit.

Along with that facility like loan against FD is the icing on the top as it can help you to get credit in times of financial need.