What are the risks of investing in fixed deposits?

In order to grow your wealth exponentially, it is very important to invest timely in life. Once you start earning your own money, make it a habit to plan an investment that’ll help you achieve your goals, no matter whether they are short-term or long-term. 

In our country, one of the most desirable investments is fixed deposits. Do you know why? This is because it is considered a safe decision as the amount isn’t affected by what’s going on in the stock market. Moreover, the Fixed Deposit Interest Rate in India is quite lucrative that pulls many individuals towards it. 

What is a fixed deposit?

As the name implies, a fixed deposit is an investment instrument with a fixed tenure and a fixed rate of return. One of the most popular investments in India, it is something that Indians favour a lot. This is because, unlike investment options such as stocks or bonds, it offers guaranteed returns and gives a sense of security. 

Non-Banking Financial corporations (NBFCs), Banks, Post-office branches and large corporations offer FDs to the public. Nowadays, investing in this scheme is as easy as ordering groceries from your smartphone. You don’t need to go anywhere. Just pick up your smartphone, download the right application, and you are more than good to go. 

(Tip: Use a FD calculator before investing your hard-earned money.)

What are the risks of investing in fixed deposits?

  • Liquidity Risk

The first and foremost risk of investing in FDs is liquidity risk. This is because, despite the fact that this investment is liquid in nature, there is a string attached to this element. Unfortunately, a penalty is imposed when an investor plans to withdraw their money before the tenure ends. Now, the penalty here depends on the lender, and the borrower has to pay it. 

  • High Taxation Risk

Even though the FD interest rate is quite pleasing in India, if you are a senior citizen, you’ll be eligible for more benefits, such as tax benefits. Under Section 80 TTB, people above the age of 60 can avail tax benefits. However, here high taxation risk is for those who do not fall into this age bracket. This is because the return application on the FD will vary based on the tax slab that applies to you

  • Inflation Risk

For example, if an FD gives 6% interest and the rate of inflation at the moment is 4%, then the real returns earned by the investor are just 2%. This is an unsaid truth that inflation affects every kind of investment and thus increases the risk. So, even though this investment is not affected by fluctuations in the market, the real returns increase or decrease according to inflation timechi

How to invest in an FD?

To invest in such an investment instrument, it is always advisable to first use an FD calculator. Such tools make things relatively easy and simple for you. However, coming to our prime question, investing in an FD is quite easy now. I planned to invest in the same around five and a half months ago. This was when my associate guided me about the Bajaj Finserv application.

I’m not promoting any application here., but believe me, it is one of the best applications I’ve ever used for investments. 

  1. Download the app from App Store/Play Store. 
  2. Sign up by entering your mobile number
  3. Go to the Fixed Deposit option under the Investment Bazaar on the home page
  4. Choose accordingly, and you are good to go apsession.

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