Fixed Deposit Interest Rate: Multiple smaller FDs or one consolidated FD which will earn higher returns?

 

Fixed Deposits (FDs) are considered a safe and reliable investment option for individuals looking to grow their savings with minimum risk. Currently, most of the banks offer comparatively higher FD interest rates.

Fixed Deposits are gaining popularity among investors due to security of investment and higher return. Fixed Deposit schemes are offered by banks and financial institutions for a predetermined period. These deposits are considered low-risk investments, offering a fixed rate of return over a specified tenure, making them an attractive option for conservative investors. Many banks are currently offering higher interest rates on FDs compared to conventional savings instruments.  

Fixed Deposits (FDs) have long been considered a safe and reliable investment option for individuals looking to grow their savings with minimum risk.

When it comes to maximising returns on FDs, a common dilemma arises whether to put all your money in a single consolidated FD or split the investment into multiple smaller FDs. While you may choose a single large FD or multiple smaller FDs as per your need and risk calculation, both the options have their advantages and limitations.

PROS AND CONS OF ONE CONSOLIDATED FD

Opting for a single consolidated FD simplifies the investment process, with a fixed interest rate for the chosen tenure. It offers simplicity, convenience and potentially higher interest rates.

Pros:

1.      Simplicity: Easy management with minimal paperwork.

2.      Convenience: Lump sum amount at maturity for future planning.

3.      Higher interest rates: Potential preferential rates for larger deposits.

Cons:

1.      Liquidity constraints: Limited access with penalties for premature withdrawal.

2.      Fixed interest rate: May miss out on potential rate increases as the banks keep on revising their FD interest rates.

Read More: Petrol, Diesel June 11 Price List: Check New Rates In Delhi, Mumbai And Other Cities

MULTIPLE SMALLER FDS AND LADDERING

Splitting the investment into smaller FDs offers advantages, with staggered maturities but it has its own limitations.

Pros:

1.      Higher interest rates: Benefit from varied FD interest rates.

2.      Improved liquidity: Access funds regularly without significant penalties.

Cons:

1.      Complexity: Requires additional paperwork and tracking multiple FDs could be a tough task.

2.      Reduced convenience: Managing multiple FDs may be less convenient than a consolidated FD.

There is no fixed rule and you should choose a single consolidated FD or many multiple FDs depending on your financial goal and investment horizon.

By dividing your investment, you gain flexibility and access to funds at different intervals, which enhance liquidity. Varying tenures allow you to optimise interest rates and you can potentially reinvest it at higher rates for better returns. Diversifying across smaller FDs mitigates risk, as difficulties faced by one institution won’t affect your entire investment.

On the other hand, if you have large fund requirements and you are aiming to park your money in a secure investment instrument for the future then one single FD can also be suitable.  

It’s important to make informed decisions, evaluate your financial situation and goals carefully before finalising on FD investments. Seeking advice from a financial advisor on your FD investments can offer valuable insights for selecting the investment strategy that best aligns with your needs.

Comments

Post a Comment

Popular posts from this blog

Senior Citizen Train Ticket Discount: Government has issued a new statement regarding giving discount to senior citizens on train tickets, know the details here

Image
  Senior Citizen Train Ticket Discount: Once again a demand has been made in the Lok Sabha to give discount to senior citizens on train tickets. Senior Citizen Train Ticket Discount:  Railways has withdrawn the discount given to senior citizens on train tickets since the Corona period. However, from time to time there has been a demand to restore this concession given to senior citizens in trains. Even in the winter session of the Lok Sabha, some members raised the demand for increasing fare concessions and facilities for senior citizens traveling in trains. However, even before this, Railway Minister Ashwini Vaishnav has told in the Lok Sabha that during the train journey, every passenger is given an average subsidy of 53 percent on the train ticket. Apart from this, he also told who gets discount on tickets while traveling by train. Demand for discount in train tickets raised again During Zero Hour in the House, Janata Dal (United) MP Kaushalendra Kumar said that before the Corona ep
Read more

Cash Transaction Rules: Income tax rules on cash transaction between Husband-Wife and Son-Father, know rules

Image
  Cash Transaction Rules: Income tax keeps an eye on our every transaction. But is there any tax on cash transactions or can Income Tax send a notice? Or how much cash transaction can take place between you and your wife or between father and son? If you also have these questions in your mind, then let us know their answers… If you also transact money between father and son or between husband and wife, then this news is useful for you. Actually, every transaction of ours has an eye on income. In such a situation, a question arises in the minds of many people whether income tax notice can be received even on cash transactions? Let us know how much cash transaction you can do in your family. Income tax sends notice? According to tax experts, if you give money every month for household expenses or give money as a gift, then the wife is not liable for income tax. Both these types of amounts will be considered as the income of the husband. The wife will not receive any notice from the Incom
Read more

Have a Current/Savings Bank Account? Know the Cash Deposit Limits under Income Tax Act to avoid Penalties and Notices

Image
  Adhering to cash deposit and withdrawal limits is crucial to remain compliant with the Income Tax Act in India. This article aims to elucidate the various facets of cash-related regulations, encompassing savings and current accounts, fixed deposits, credit card bill payments, real estate transactions, and more.  Cash Deposit Limits in Savings and Current Accounts The Indian Income Tax Act imposes specific regulations on significant cash deposits in savings accounts. Individuals accumulating INR 10 lakh or more during a fiscal year must notify tax authorities.  For current accounts, this threshold is set higher at INR 50 lakh. Although not immediately taxed, financial institutions report transactions exceeding these limits.  Cash Withdrawal and TDS under Section 194N  Section 194N outlines TDS rules for cash withdrawals. A 2% TDS is levied on withdrawals exceeding INR 1 crore within a fiscal year. Non-filers face a 2% TDS on withdrawals over INR 20 lakh and a 5% TDS on amounts exceedi
Read more