Most people are unaware that Fixed deposits (FD) can be one of the most reliable investment avenues and yield excellent returns in the longer period. Before diving straight in, however, it will be beneficial to understand the meaning of this investment option.
Understanding FDs
These are investment accounts in which a certain amount is invested for a specific period of time. Moreover, the amount earns interest at a pre-determined rate that does not vary during the entire investment duration. Generally, holders cannot withdraw the sum before the maturity date and no further investments can be made. In case the amount is withdrawn before maturity, there is a penalty that the investors need to pay.
Interest Rate
Fixed deposit interest rates are higher, as compared to savings account rates. This is because the invested amount is locked-in for a specified time period before its maturity. The interest rates vary from one institution to another and you can use an online FD calculator to determine your returns on such investment. These calculators also help you compare rates offered by different institutions so that you can make a better-informed decision.
Benefits of FDs
- Financial stability
When you invest your money in FDs, you are assured of the fixed guaranteed returns based on the fixed deposit rates of interest. This offers financial stability when compared to other investments like equities or mutual funds, where the returns are based on market performance.
- Security
As the fixed deposit investment is locked-in for the agreed time period, the funds are inaccessible to investors. However, this means that you can be assured of getting the investment on the maturity date. This makes FDs an excellent investment avenue to include, specifically for meeting certain financial goals in the future.
- Regular income
The interest on these FDs is payable at regular intervals, which is generally every quarter. This makes it an excellent tool for earning a regular income, especially for retirees, while also ensuring that their investments remain secure.
- Compounding benefits
Investors can further increase their returns by choosing to not cash-out their interest income on the FD. This amount is further added to your deposit amount, which earns more interest in the longer period. The compounding effect on the original investment can yield a significantly higher return for the duration of your deposit.
- Tax advantages
The sum invested in tax-saving FDs is exempt, while determining your tax liability. Under section 80 C of the Income Tax Act, 1961, the principal on any amount (between INR 100 and INR 1.5 lacs) in a 5-year FD is exempt from taxes. However, the interest earned on the FD is taxable beyond a certain limit.
With all of these benefits for investing in FDs, they offer investors a safe and reliable option for the long term. For this reason, it makes sense to include them in your investment portfolio, after considering your financial requirements for the future.
Click here (http://www.mahindrafinance.com/fixed-deposit.aspx) to know more about fixed deposit and their interest rates.
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I researched on the web and found out some good p2p lending platforms like http://www.loankuber.com/. I am thinking of investing a small amount to start with.
Peer-to-peer lending works on a simple model, people sign up to the platform as either a borrower or a lender. The borrower submits an application for a loan. The lending platform leverages technology and online data to quickly assess risk, figure out a credit rating and assign an appropriate interest rate.
Now the loan is available for investors to fund. Investors can be individuals, private companies or financial institutions and typically invest in many different loans to spread their risk.
While there are tremendous advantages of peer-to-peer lending and growth has been breakneck, to create a balanced view, we consider some questions:
1. Do the investors fully understand the risks? P2P lending marketplaces are platforms – the risk of the loan is on the lender. Therefore, it is important to assess the credit rating process of a platform before you sign up as an investor.
2. Is it too young? The industry is still nascent and while default rates have been lower than the credit card industry, the timeframe is not large enough to reach a definitive conclusion.
Hi, very informative article.
I am 28 years old and I am searching for good investment options. I just came to know about peer to peer lending as an emerging platform in India and wanted your views on that.