Fixed deposits have been the first choice of investors who are looking for high returns along with the stability of the invested amount. There are two types of fixed deposits- Cumulative FD and Non-Cumulative FD.
The interest is provided along with the principal amount upon completion of the FD tenor if you invest in a cumulative FD plan. You can opt for periodic payment of interest by investing in a non-cumulative FD. The interest rate depends on numerous factors like FD type, tenor, and financier that you have selected to lock-in your savings.
The bank FD rates can range anywhere between 3.5 to 6% depending on these factors. These fixed deposit interest rates are not sufficient enough to beat the inflation rate. Also, a lack of stable investment opportunities due to fluctuations in market conditions might create a feeling of uncertainty among the investors.
However, you can still earn better returns with fixed deposits if you follow some smart tricks that are mentioned below:
Choose a tenor wisely
The FD interest rate remains constant throughout the tenor. Therefore, by investing in an FD of longer tenor that doesn’t offer the FD rate that you expect, you might lose out on the opportunity of depositing at a higher rate in the future.
As a result, you must choose a tenor wisely as per the applicable interest rate, your financial plans, and liquidity needs.
Some financiers such as Bajaj Finance allow you to pick a tenor between 12 and 60 months as per your financial requirements. You can lock-in your savings in these FD plans accordingly.
Re-invest your returns
The bank FD rates are on the lower side as the RBI has reduced the repo rate aggressively to cushion the economic crisis. Therefore, to grow your investments at a steady pace you can keep reinvesting your returns to create the effect of compounding on them.
Those who do not want to avail periodic interest payouts can invest in cumulative FDs that compound the interest periodically and the accumulated interest can be reinvested to multiply the returns at a faster rate.
Invest in corporate FDs
Corporate FDs are still offering much higher FD rates than bank FDs. For instance, you get interest rates up to 6.85% with Bajaj Finance FDs. This is almost 1-2% more than the average interest rates offered by bank FDs nowadays.
To check how this greater interest rate affects your returns, you can use an FD calculator monthly interest tool. It is advisable to lock-in existing high rates before there is a further rate cut.
Invest in multiple FD plans
If you are not comfortable in locking your entire savings in one deposit, you can split your funds in multiple FDs and choose a different tenor for each deposit.
This will not only provide better liquidity that could prove to be useful in times of crisis but it will also average out the difference in interest rates as you can reinvest your returns at a higher FD rate in the future.
Bajaj Finance provides a multi-deposit facility that lets you invest in multiple fixed deposit plans of a varying tenors. This enables you to ladder your deposits conveniently as you use a single cheque payment for investing in various FD plans.
Moreover, you also get a 0.10% additional interest rate on booking an FD online. These FDs are secure as credit rating organizations like ICRA and CRISIL have conferred them with high stability ratings of MAAA/Stable and FAAA/Stable respectively.
Fixed deposit plans are ideal for those investors who have a low-risk appetite. The lowering of bank FD rates has created a feeling of uncertainty among investors. However, they need not get confused as Bajaj Finance FDs are still offering high-interest rates up to 6.85%.
You can invest in these FDs and you can also ladder your investments by using the multi-deposit facility. Flexible tenors and interest payout options are available with Bajaj Finance FD to suit the requirements of different investors. To find the returns of individual deposits you can use an FD rate calculator.