Stable returns, flexible tenure: Why do you need FDs in your portfolio?

Fixed deposits (FDs) have become an essential component of investment portfolios, particularly for conservative investors seeking stability and predictable returns. As financial markets fluctuate, the need for secure investment options has never been more critical.

 

“Fixed Deposits (FDs) remain important in any balanced portfolio. They offer safety, fixed returns and liquidity. This makes them a good option, especially during volatile market conditions. Many banks and financial institutions offer FD rates of 7-8 per cent per annum even higher in some cases. Senior citizens often get an additional 0.5 per cent to 0.75 per cent interest. This makes FDs a reliable choice for post-retirement income. Unlike stocks or mutual funds, FDs guarantee returns. They act as a buffer when markets dip. In uncertain economic trends, this stability is key,” said Adhil Shetty, CEO of Bankbazaar.com.

 

 

Why one should invest in FD

 

Stable returns and low risk

 

One of the most compelling reasons to include fixed deposits in your investment portfolio is their ability to provide stable returns. Unlike stocks or mutual funds, which are subject to market volatility, fixed deposits offer a guaranteed interest rate for the duration of the investment. This predictability allows investors to accurately forecast their returns and plan their finances accordingly.  Calculate EMI: EMI Calculator Tool

 

Moreover, fixed deposits are considered low-risk investments. They are not influenced by market fluctuations, making them a safe haven during economic downturns. For individuals looking to preserve their capital while earning a return, FDs serve as an ideal solution.

 

Capital preservation

 

Fixed deposits ensure that the principal amount invested is preserved. Investors can rest assured that they will receive their initial investment back along with accrued interest at maturity. This feature is particularly appealing in uncertain economic climates when preserving wealth becomes paramount.

 

Flexibility in tenure

  Another advantage of fixed deposits is the flexibility they offer in terms of investment duration. Investors can choose tenures ranging from a few months to several years, allowing them to align their investments with specific financial goals or liquidity needs. This flexibility makes FDs suitable for various life stages—whether saving for a child's education or planning for retirement.

  Regular income stream

 

For retirees or those seeking a steady cash flow, fixed deposits can provide regular income through periodic interest payments. Investors can opt for non-cumulative FDs that pay out interest monthly, quarterly, or annually, ensuring a consistent income stream without relying solely on market-linked investments. This feature enhances financial security and helps meet ongoing expenses.

 

Liquidity options

 

While fixed deposits typically have a predetermined tenure, many banks allow for premature withdrawals with some penalties. This liquidity feature is advantageous in emergencies or unexpected expenses, providing peace of mind to investors who may need access to cash. Additionally, FDs can often be used as collateral for loans, further enhancing their liquidity profile.

 

“Keeping some funds in FDs for emergencies or short-term goals is wise. FDs won’t beat inflation alone, but they provide balance. Combined with equities, they reduce overall risk. You must remember that a good portfolio is about more than just high returns. It needs to blend growth, safety, and liquidity. FDs help achieve that balance,” Shetty said.