WHAT IS FIXED DEPOSIT?FIXED DEPOSIT PROS & CONS

PRESENTED BY:

NARENDRA PRATAP, FINANCIAL ADVISER

FIXED DEPOSIT

• Fixed deposit (FD) is a financial instrument where a sum of money given to a bank, financial institution or company whereby the receiving entity pays interest at a specified percentage for the time duration of the deposit. The rate of interest paid for fixed deposit vary according to amount, period and from bank to bank. At the end of the time period of the deposit the amount that is originally given is returned to the investor.

PROS OF FIXED DEPOSIT• High rates of interest - As is already well-known fixed deposit

accounts and considerably good amount of interest; more than the interest earned on any other forms of savings accounts.

PROS OF FIXED DEPOSIT

• Safety of your future – if you choose the right bank or company, you can consider your future quite secure. You will get back the money you put away along with a fat sum of interest.

PROS OF FIXED DEPOSIT

• Lower risk as compared to risk involved in investing in stocks. When you invest in stocks, there is a chance of you losing the initial value of the money you invested. Fixed deposits involve a very low risk of losing your investment.

CONS OF FIXED DEPOSITS• Protection against inflation. The fixed interest rates which are

given on fixed deposits do not give you any protection against inflation. The cost of living is constantly rising a wiser option would be to invest in shares of a good company which goes in rhythm inflation. In the long run, the value of the return on your investment in a fixed deposit account might be much lower than what you are likely to get from shares in a company which beats inflation.

CONS OF FIXED DEPOSITS

• One of the biggest drawbacks of having a huge part of your savings in a fixed deposit account is that you cannot withdraw funds during the tenure. This, however, will only be a drawback if there happens to be any emergency that comes up during the fixed period; an emergency which would require you to break the deposit.

CONS OF FIXED DEPOSITS

• The risk factor. It is very important to be careful in choosing the right financial institution for saving. In the case of a financial crisis remember that fixed depositors will be one of the last to be paid off. The companies which offer a very high rate of interest are usually the ones which have a higher risk.

CONS OF FIXED DEPOSITS

• Income Tax. The interest received on fixed deposits is treated as income and is taxable. So if you look at it from the investment point of view, there are a few other options such as mutual funds which will give you some tax benefits.

• As every form of investment has its pros and cons, it is not fair to claim that one stands to be much better than the other. There are several personal factors and requirements which should be taken into consideration while making choices with your savings and investments. Companies which offer unreal rates if interest and saving schemes are usually the ones which involve the highest amount of risk. Be wise when you choose to invest your hard-earned money.

THANK YOUKEEP INVESTING IN FIXED DEPOSIT.