Investing in Fixed Deposits is unarguably a smart decision – you get a steady return on your investment and your money is always safe as it is not affected by market changes. While investing in FDs is a smart decision, putting all your money in FDs only might not be a wise choice.
The first and most important reason for this is that the rate of return on Fixed Deposits has been declining continuously and today stands somewhere between 6 percent to 7 percent. If we compare this rate of return with the expected inflation rate, then you will find out that FDs are not really helping you in a big way.
At the same time, if you choose a normal Fixed Deposit, you are not going to get any tax exemption. There are tax-saving FDs too but then they have a lock-in period of at least five years. So, if you are willing to lock your money for five years then why not increase your rate of return by taking a little risk?
It is true that investing in FDs will help you keep your ship afloat but dividing your money and investing in different products can also help you in getting an extra return. For example, there are a number of options that are readily available like SIPs, mutual funds, insurance plans, PF, PPF, etc.
The market-based investment plans also come in three different categories with a low, moderate, and high risk factor. Even if you choose a low-risk investment product, the rate of return is expected to be slightly more than that on Fixed Deposits. If you follow an expert’s advice while investing or prepare yourself to make sensible investment decisions then the chances of incurring any losses become negligible.
Therefore, it is imperative that you try different financial products to save your taxes, get insurance and also multiply your wealth. As mentioned above, the rate of return on FD with the growing inflation rate can only keep your money safe but might not be very helpful in funding your dreams of buying a new car, house, or paying your child’s college fee.
On the other hand, if you smartly invest your money in different financial products based on duration, risk, and rate of return, you will definitely be able to generate more wealth which will help you in tough situations. This is the right time for you to move beyond conventional techniques and give a shot to better opportunities.