How Investing in a Term Deposit could be a financially smart choice for you

Long Term Investment

Term deposits are one of the most popular investment options to get a stable and safe return. In this method, a certain sum of money is kept for a fixed period of maturity and the depositor is not allowed to withdraw the funds during this time. It is only at the end of the maturity period that the funds can be taken out. This is the reason why they are called term deposits. Recurring deposits and Fixed Deposit plans are the two types of term deposits. The term deposits interest rates make them an attractive investment option. There Are multiple advantages of making term deposits a part of your investment plan.

Offers fixed returns

For ages, the term deposits have been the go-to investment product for many. The guarantee offered on the returns makes it an attractive choice. It is suitable for conservative investors who have a low risk-taking ability. The term deposit interest rates continue to be constant throughout the tenor. They are not subject to market changes and are non-volatile. Even if the interest rates fall in the market the term deposit interest rates will not be affected by the same. This makes it a safe investment option as compared to others. Investors do not have to worry about the ups and downs of the market.

The investment process is hassle-free

Investing in a term deposit plan is a very simple process. There are various Fixed Deposit plans available in the market. Based on the needs and requirements of the investor one can choose the most suitable plan for themselves. The maturity instructions of the money deposited can be set automatically to be renewed. The maturity proceeds will also be automatically transferred to the accounts of the investor. This process does not require constant attention and time. It can be easily managed by any individual who is not financially literate as well.

Benefits of compounding

On choosing the reinvestment option you may even enjoy the benefits of compounding. This means that the interest earned will not just be on the principal account but also the interest that you earn. There are certain fixed deposit plans with reinvestment options available in the market. The process of compounding helps you give the snowball effect on your investments and creates wealth for you. This makes term deposits a very lucrative investment option.

Regular flow of income

You may also get a regular flow of income from your term deposit plan if you would opt for monthly or quarterly interest payouts. This creates a constant flow of cash and makes it a great investment option as compared to others. If it suits your needs then you must make it a part of your financial plan. 

Flexibility

A lot of people think that term deposits are not flexible. However, that is not the case. The term deposits offer a great amount of flexibility. It is a highly flexible investment product and can be utilized in times of need. If you want an instant loan then you can get one against your fixed deposit plan. You can get up to 90% of the fixed deposit amount as an overdraft facility. You can use as much amount as you need and then pay the interest only on the amount withdrawn. At times of emergencies when there is a sudden need for funds, this can be of great help. 

The tenor of your term deposit can be decided based on your needs. You may go for a 7 day or maybe for a 10-year plan. This depends upon the desire of the investor. Further, if you don’t want to utilize all of the funds then you may use facilities such that of sweep-in to maximize the returns. Your funds will be withdrawn only when the request for payment cannot be honored from your savings or current bank account.

Tax-saving scheme

Another benefit of investing in a term deposit is the fact that many schemes of this type, of investment option, offer tax savings options. You can use certain fixed deposits plans that can help you in saving tax and also provide benefits from exemptions under Section 80C of the income tax 1961. 

In conclusion, we can say that overall investment in a term deposit is a financially smart choice. It has gained the trust of a majority of people and become one of the most popular investment options in this country. Due to the benefits offered it can be a great decision to make it a part of your investment portfolio.

There are multiple investing options available in the market today. A term deposit is one of the best investment options amongst them. It helps in saving tax and is flexible. You can deposit money for a tenor of your choice and then withdraw when you want. You will even get an overdraft facility against your fixed deposits in times of financial need.  Term deposit may create a regular flow of income if opted for a plan of that nature. They offer fixed and assured returns and that makes it a lucrative investment option. The investment process is more or less hassle-free and gives the benefit of compounding. Making term deposit a part of your investment plan can be a very smart choice for all the advantages that it offers.

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