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How to strategize your FD investments in the current times?


At a time when returns on market-linked instruments are gradually decreasing, low-risk and fixed-income instruments like fixed deposit are back in the spotlight. The recent developments come in the backdrop of an economic contraction, which has resulted in job losses and pay-cuts. These times have aggravated the need to set aside funds for emergencies.

Why fixed-income instruments are back in focus?

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Markets have been experiencing sharp decline and rises in stock indices, at never seen before levels. The beginning of the year also witnessed the winding up of 6 mutual funds by a leading mutual fund company, which led to investors’ distrust. Most stock market investors who lost more than 30% capital, are now focusing on increased loss aversion, so they can protect their capital from further losses in future.

Thus, investors need to steer away from market-linked instruments to reap quick gains. Instead, there is a now a greater need to focus on instruments offering assured returns.

Challenges with fixed-income instruments

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Reserve Bank of India (RBI) has aggressively cut the repo rates to cushion the impact of the protracted economic crisis, which resulted in interest rates on fixed deposits being reduced to lower than 3%. In fact, even interest rates for several savings accounts are higher than these FD interest rates – a rare phenomenon indicating the graveness of these circumstances. Interest rates for fixed-income instruments like government savings schemes and PPF have also been reduced.

How to maximise returns with Fixed Deposit?

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In this scenario, individuals planning their retirement or those who have retired and are dependent on periodic income, need a different approach to grow their savings. In a system flushed with liquidity, there is lower pressure on depositors, which makes it difficult to earn lucrative returns.

However, here are some smart ways to help you strategize your FD investments.

Choose the right FD issuer

The returns on your FD depend on several factors, out of which the choice of issuer is of paramount importance. While you may feel tempted to invest in deposits offering sky-high returns, it is essential to pick an issuer offering a balance of safety with attractive returns.

You can also work towards capital appreciation by following some of these strategies, when choosing the right FD issuer:

  1. Use the average bank FD rates as a yardstick to choose FDs offered by financial institutions whose rates are about 40 basis points higher. Limit just 20% of your savings to those issuers offering FD interest rates that are 80 basis points higher than bank FD rates.
  2. Consider investing in company FDs that have been awarded the highest safety ratings.
  3. Learn about the essential figures related to your chosen issuer’s financial performance to analyse if they’re safe. You can trust your savings with issuers whose profitability, growth, capital adequacy and asset quality ratios are optimum and pose no potential risk.

You could invest in a Bajaj Finance Fixed Deposit to get assured returns up to 7.10% on your deposit. There is an additional rate benefit of 0.10% on investing online, and senior citizens can benefit from 0.25% more returns.

Along with attractive returns on deposit, you can also ensure the highest safety of your deposit with Bajaj Finance, as this FD is accredited with the highest safety ratings of FAAA by CRISIL and MAAA by ICRA.

Ladder your deposits for higher flexibility

During these times, planning investments to ensure high liquidity, is a prerequisite. Hence, it is best to ladder your deposits, so each deposit matures at different time intervals. This ensures that you receive payouts at different times, and can help avoid premature withdrawals. To help you plan how to ladder your investments, consider using the Bajaj Finance FD rate calculator. This easy to use tool can help you know your returns beforehand.

It is best to allocate funds for each of your deposits, based on your investment goals. The deposit with the largest amount could mature over the longest tenure, while smaller investments can be held for shorter tenures. Bajaj Finance also offers flexible tenures ranging from 12 to 60 months, to help you ladder your investments easily.  

Avail additional rate benefits on deposits

Issuers like Bajaj Finance offer additional rate benefits on deposits, which can translate to higher gains. For example, individuals below 60 years of age can earn returns up to 7.10%, which goes up to 7.20% on investing online. To see a difference in returns, let’s assume an amount of Rs. 10,00,000 is invested in a Bajaj Finance FD for 5 years. Let’s compare these returns, along with returns on regular bank FD.

It is clear from the above table that investing in a Bajaj Finance online FD can yield Rs. 6591 more than investing offline. Also, interest earnings on bank FD (assuming interest rates as per industry average) are Rs. 1,01,642 lower than interest earned on Bajaj Finance online FD.

Another aspect to note is that senior citizens also get additional interest rates of 0.25% with Bajaj Finance, and you can get these additional returns by investing on behalf of your parents or grandparents.

The table above shows the returns for senior citizens, for the same investment amount and tenure taken as an example above.

Now is a great time to lock in to lucrative FD rates offered by Bajaj Finance, and you can start investing with just Rs. 25,000. However, if you’re looking to raise a lumpsum with small contributions, you can also consider saving with Systematic Deposit Plan (SDP), where you can start saving with just Rs. 5000 per month.

Consider making a smart choice with Bajaj Finance, and get started with an investment from the comfort of your home. You can reap the benefit of a completely paperless procedure that helps you avoid the hassle of visiting the branch.

Disclaimer: This content is distributed by Bajaj Finserv. No TNIE Group journalist is involved in the creation of this content.

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