Fixed Deposit As A Sensible Investment Tool

Among the many investment programs and financial propositions which are functioning in the market today, fixed deposit is considered to be a beneficial financial product. Fixed deposit is an investment tool which is offered by banks and financial institutions of both public and private sector. The fund which is invested by an individual in this investment program is used by the financial companies and banks, for investing into market debt instruments. So what does the fixed deposit holder get in return? Well, banks offer fixed deposit interest rates which reap profit and good returns for the investor in future.

Fixed Deposit rates depend completely upon whether the program is being offered by government banks or private sector banks. If you have opened a fixed deposit account with government bank, you will get low interest rate. In case of private financial company the interest rate will be higher. Fixed deposit is considered to be useful for long term investment. The level of returns is directly related to the interest rates which are being offered. If the interest rate is low, risk involved is also low and vice-versa.

However, before investing in any fixed deposit scheme, it is always better to research the market. If you want better interest rates and are planning to contact a private financial company, make sure you find out all the details about the company. Organizations which do not have a stable business and frequently incur losses are not to be trusted with your money. Also, the interest earned on the fixed deposit plan with such companies is taxable. It is only when you choose to have fixed deposit account with government bank, you get exempted from tax; because it offers you low fixed deposit rates and thereby lower returns.

An individual gets to choose his or her time period. This means that the amount of time for which the fixed deposit capital is locked, can be customized by you as per your requirement. You also get the liberty to choose the processing of your fixed deposit interest rate. If you are comfortable with receiving money on a monthly, three-monthly or yearly basis, you can pick and choose the same. Fixed deposit rate is however pre-determined and you normally do not have much choice in that area.

Other financial investment schemes like stocks, mutual funds, financial commodities and others, come with a considerable amount of risk. Your funds are not as safe with these programs as they are in a fixed deposit scheme. And, you certainly cannot withdraw your capital before the date of maturity, as this would mean occurrence of heavy losses. Fixed deposit also locks your money for a stipulated period of time and you ideally cannot do premature redemption. However, if in case you do require to redeem your money before the date of maturity, you will be charged penalty charges. Apart from that, no significant loss would be subjected to you.