Looking to Build a Successful Investment Portfolio? 5 Reasons Why FDs Are an Excellent Addition

Equity stocks, mutual funds, government and company bonds, and real estate are some of the most popular investment options in India. While there are now options to suit every type of investor, one should focus on building a diversified portfolio that can survive the worst of market conditions.

This makes it very important for every investor to add something stable to their portfolio to have that safety cushion that the portfolio can rely upon at times of need. One of the best options for the same is fixed deposits. Let us have a look at some reasons that make fixed deposits a must for every diversified portfolio-

1. Guaranteed Returns

The biggest reason for investing in a fixed deposit is the guaranteed returns. While the returns from other investment options like the stock market and real estate abundantly rely on the market conditions, you are guaranteed to receive the pre-fixed interest on your fixed deposit investment upon completion of the tenure.

While most other investments can also result in capital losses, you can be rest assured that you will receive your capital as well as the interest from your fixed deposit after the tenure. Moreover, a fixed deposit is also one of the most affordable investment options. There are now banks that allow you to start a fixed deposit with just Rs. 1,000.

2. Flexible Investment Tenure

If you are investing in something like the stock market, mutual funds, or real estate, there is no fixed duration after which you will be able to withdraw your investment. You might have to remain invested for multiple years to earn considerable profits.

However, with fixed deposits, you get to select your own investment tenure. Most banks now allow you to invest in fixed deposits for 1 year and up to 5 years and even more. Depending on your investment needs, you can select a tenure that suits you best.

3. Multiple Interest Payout Options

Don’t want to wait for the entire tenure of the fixed deposit investment to receive the interest? You have the option to select your own interest payout duration too. Many banks now offer monthly, quarterly and annual interest payout options.

So, if you want to receive the interest from your fixed deposit investment regularly or want an additional source of fixed income, you can also go for the monthly or quarterly payout option.

4. Inculcates a Habit of Saving

Once you select the fixed deposit tenure, your investment will be locked for the duration. While you can go for premature withdrawal, you will most likely be required to pay the penalty for the same.

This lock-in period of fixed deposits encourages you to remain invested throughout the selected tenure. So, in a way, fixed deposits also promote a habit of saving and managing your finances more efficiently.

5. Easy Reinvestment Option

Most of the banks now also offer Fd reinvestment option. With this option, your capital, as well as the interest that you have earned from your fixed deposit, is again invested to help you get even higher returns due to the power of compounding.

If you do not really need the money after completion of your fixed deposit tenure, go for the reinvestment option as it is one of the easiest ways to earn higher interest.

Fixed Deposits for Portfolio Stability

Ask any professional investor, and they will agree that stability plays a vital role in any well-diversified portfolio. Fixed deposits are one of the most effective ways to achieve that stability and ensure that your portfolio can accommodate or at least reduce the negative impact that your portfolio might witness when other markets start underperforming.

Look for a top bank for opening a fixed deposit account to experience the valuable benefits discussed above.