What Makes Fixed Deposits a Safer Choice During Market Volatility?
When the market goes through its set of ups and downs, triggered by economic uncertainties, geopolitical events, and market cycles, it makes investors very uncomfortable for understandable reasons.
When our own money is invested, the nervousness is natural. However, this excerpt is for investors who do not wish to be big and bold with their investments but rather invest and grow, regardless of market volatility. This is also for investors who wish to choose a safe and lean investment option in their portfolio during market fluctuations in the foreseeable future.
Fixed Deposits (FDs) have been a trusted investment option that has stood the test of time as a reliable choice even during turbulence. But why exactly are they that way?
Today, we'll look at why risk-averse investors continue to favor fixed deposits and how their steadiness provides solace.
1. Protection of Principal Amount
One of the main concerns for investors is the safety of their principal amount invested, especially those who are risk-averse. But unlike mutual funds, FD deposits are not affected by market fluctuations. The principal amount remains unchanged, and returns are assured guaranteed to arrive on schedule.
Regardless of external conditions, including market downturns, FD deposits continue to generate returns at the predefined rate. This guarantee is quite important for those who cannot afford to lose their hard-earned savings.
Knowing how much money investors will make from their investments makes life a lot easier. For retirees, salaried people, and those with set financial objectives in particular, it aids in better planning.
They receive a set interest rate for a certain tenure when they invest in an FD deposit, which is determined at the time of booking. Unlike equities or market-linked investments, their investments are safe and guaranteed to yield profits regardless of whether the market is in a bull or bear market.
3. Competitive FD Interest Rates
Banks and other financial institutions have continued to offer alluring FD interest rates over time in order to attract investors looking for stability. Some banks offer some of the best fixed deposit interest rates for senior citizens or those with longer tenures. Rates, however, could vary depending on tenure and the institution.
Furthermore, when the stock market is erratic or performing poorly, the fixed features of FDs become even more appealing to investors.
4. Optional Lock-in At the Time of High FD Rate Cycles
When high FD rates are offered, often at the time of high inflation and tightening monetary policies, investors can lock in the attractive rates through FDs for a long-term tenure. Smart investors are very well aware of this investment strategy. Of course, they have to track interest rate cycles every so often to use this successfully.
Another strategy where this feature is effective is through investments in multiple FDs with different maturity dates. This enhances the chance of liquidity with higher returns. Many conservative investors apply this strategy to increase their earnings quickly.
5. Flexible Tenure & Payouts
Flexibility is another important factor that makes fixed deposits so appealing to clients who are risk-averse. From 7 days to 10 years, investors can choose a tenure that works for their financial goals. FD customers can also choose between the option of non-cumulative (interest paid monthly, quarterly, or annually) or cumulative (interest paid at maturity) FDs.
For those looking for consistent cash flows or retirees, this makes FDs the best choice not only for saving but also as a tool for earning income.
6. Insurance Cover Adds a Safety Net
Many risk-averse investors select fixed deposits as their safest investment option for this reason. As per RBI guidelines, FD deposits up to ₹5 lakh in each bank are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This includes both principal and interest.
For customers who prefer to avoid risks at all costs, this insurance coverage offers an extra layer of protection.
Unlike other financial tools, FDs do not require a substantial initial commitment. Depending on the bank and financial organization, the initial capital may be as low as ₹1,000. This enables a wide range of people, including students, homemakers, salaried people, and retirees, to have access to the highest FD rates and earnings.
FDs are perfect for new investors because they are straightforward, easy to comprehend, and void of intricate procedures or market dependencies.
The 5-year tax-saving fixed deposit under Section 80C of the Income Tax Act is an additional benefit for investors wishing to reduce their taxes. The principal amount invested is eligible for an annual tax deduction of up to ₹1.5 lakh, even though the interest is taxable.
The mix of capital safety, fixed yield, and tax savings makes FDs even more alluring in volatile markets.
9. Higher Interest Schemes for Senior Citizens
Senior Citizens are offered special FD interest rates by almost all banks and financial institutions today. More importantly, these interest rates are higher than regular or general FD schemes. Sometimes up to 0.50% more than the general rate. This helps our older investors earn better after retirement and live a dignified, financially independent life without any worry of market or inflation.
Currently, SBM Bank India is providing one of the most competitive rates in the industry – click here to view the rates . up to 8.50% on FD interest rates.
Opening or renewing an FD no longer requires trips to the bank. Most banks now offer digital platforms and smartphone apps that make it easy to start, track, or cancel FD deposits online, including SBM Bank.
Choosing a tenure, comparing the best FD rates, and receiving the maturity funds directly into your account are all possible from the comfort of your home. This simplifies the life of investors by making fixed deposits a dependable and hassle-free investment instrument.
When the market is volatile, peace of mind becomes the most valuable asset. That’s exactly what fixed deposits offer: stability, predictability, and a sense of financial security.
It is worthwhile to take into account the silent power of FDs during a period when market-linked instruments are experiencing tremendous swings. They may not guarantee enormous profits, but they do provide the three things that risk-averse consumers appreciate most.
This makes fixed deposits an important addition to the investment portfolio and can also act as an important financial anchor if one wants to weather market turbulence hassle-free.
