Today, there are different investment instruments you can choose from. One of these is a Fixed Deposit, which is widely preferred and offered by various banks. An FD is a Term Deposit that lets you deposit your funds for a particular tenure. In return, your bank provides interest at a rate decided at the start of the deposit. Here are the key advantages of a Fixed Deposit that make it an excellent choice for individuals:

Carries minimal risk

An FD carries minimal to no risk to the investor. When you opt for an FD, you can enjoy predictable returns on your investment. The returns of your deposit depend on FD interest rates your bank offers. These rates do not change. Instead, once fixed at the time of account opening, the interest rate stays the same during the tenure. Hence, an FD offers assured returns, allowing you to plan for your financial goals with more ease.

Preserves capital

When you open an FD, you need not worry about capital erosion. Instead, the money you deposit in the FD remains with the bank and earns interest on time. Once the FD matures, you can get back the entire investment amount. Hence, you do not lose any money from your investment. In addition, the DICGC insures your deposit for up to Rs. 5 lakh, making FDs relatively safe.

Flexibility to withdraw

Tax-Saving FDs do not permit investors to withdraw funds during their lock-in period. However, most banks let you withdraw other FDs prematurely. This benefit enables you to dip into the funds before the maturity of your FD in the case of a financial emergency. Banks may levy a nominal charge on premature withdrawals, but your funds are readily available whenever needed.

Choice of multiple tenures

The tenure is flexible and depends on you. Banks may have rules for minimum and maximum tenure. However, you can consider the available tenures and pick one for your Fixed Deposit based on your investment goals.

Requires effort once

Today, you can conveniently open an FD online from anywhere and anytime. Once done, you need not monitor the market to determine your FD performance. Your FD is not influenced by market volatility, and the interest rate determined at the start of the FD remains the same throughout its tenure.

Saves taxes

Choosing a Tax-Saving FD benefits you from tax deductions of up to Rs. 1.5 lakh. This benefit is available u/s 80C of the Indian Tax Act.

Conclusion

An FD is often considered the most secure form of investment. It involves the listed benefits. So, if you want a safe avenue to park your funds and earn interest, you can opt for an FD.