Place Your Money in Fixed Deposits
Stock markets are crashing, inflation is sky rocketing and the economy is in doldrums. In such conditions, where do you stash the little money you manage to save with such great difficulties? Well, there is a refuge for your hard earned and even harder saved money – a fixed deposit. Fixed deposits have for long been a reliable, steady place to stow your money. Admittedly, the interest rates of a fixed deposit scheme can't beat that of stocks and securities, but when chances are high that you can't even recoup your capital from such investments, its best to stick to less volatile even if less lucrative measures like the good old fixed deposit. This isn't to say that such schemes don't have their own attractions, though. You'll find that fixed deposits (FDs) are of two sorts – those offered by banks and those by companies. Needless to say, FDs offered by banks are much safer, with the Reserve Bank of India carefully regulates them and insures money for up to 1 lakh.
FDs offered by companies are less reliable. Should the company go bankrupt, and then the chances are that you can watch your money as it goes down the drain. FDs in banks on the other hand are immensely popular and widely considered as a safe investment. Your money earns a regular income, for a fixed period. It also allows you to save tax money under section 80 C of the Indian Income Tax Act. You are simultaneously earning as well as saving money. Various banks offer you various interest rates for FDs, so it's best that you shop around for the bank that gives you the best rates before you deposit your money in it. The interest can be either monthly or quarterly, and if you deposit enough as capital, you could easily live off of the interest. It is a common tactic used by retirees.
That FDs have such advantages doesn't mean they don't have a flip side as well. You'll likely crib at the lower rates of return, as compared to stocks. You'll find that FDs are taxable fully and are usually added to your income. It's mean that you'll end up paying taxes for it, thereby eating into your returns. Another problem is likely that of inflation eating into your returns. Your interest rates are fixed while inflation could rise up easily. In such cases, your money is eaten into rather easily. FDs have their pros and their cons – it's up to the smart consumer to know whether the investment is worthwhile.
FDs offered by companies are less reliable. Should the company go bankrupt, and then the chances are that you can watch your money as it goes down the drain. FDs in banks on the other hand are immensely popular and widely considered as a safe investment. Your money earns a regular income, for a fixed period. It also allows you to save tax money under section 80 C of the Indian Income Tax Act. You are simultaneously earning as well as saving money. Various banks offer you various interest rates for FDs, so it's best that you shop around for the bank that gives you the best rates before you deposit your money in it. The interest can be either monthly or quarterly, and if you deposit enough as capital, you could easily live off of the interest. It is a common tactic used by retirees.
That FDs have such advantages doesn't mean they don't have a flip side as well. You'll likely crib at the lower rates of return, as compared to stocks. You'll find that FDs are taxable fully and are usually added to your income. It's mean that you'll end up paying taxes for it, thereby eating into your returns. Another problem is likely that of inflation eating into your returns. Your interest rates are fixed while inflation could rise up easily. In such cases, your money is eaten into rather easily. FDs have their pros and their cons – it's up to the smart consumer to know whether the investment is worthwhile.
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