In case you wish to put your money in an FD, it's much better to do so with a reputed bankSince the onset of the COVID-19 pandemic, it's been a year where the world has actually changed.
Our lives have actually been transformed, and the monetary system, too, has actually been struck hard.
In such a situation, investors have actually searched for safe havens to park their hard-earned money.
They have sought options that are low on risk while assuring returns.
One such popular investment choice has been bank repaired deposits (FD), mainly because they are short on the risk metre.
However, what very few financiers understand is that FDs featured a few threats as well.Take these following points into account before picking a bank fixed deposit.1.
Withdrawing money prior to maturityWhen you are buying a repaired deposit, your cash is parked for a particular quantity of time till it grows.
You can withdraw the money in case of an emergency situation prior to the term, but then you'll need to pay some penalty.
So, remember the exit route before maturity or the absence of it while investing in a fixed deposit.2.
Select a reputed bankThough it does not happen often, little banks can be vulnerable to defaults.
Whenever you want to invest in an FD, it's better to do so with a reputed bank.
Do not get drawn by high rates used by lesser-known banks.
To put it simply, simply the rate of return ought to not be the sole guiding factor while selecting an FD.3.
In case of inflations, what happens to the genuine returnReal return is what an investor gets after the return is changed for inflation.
If the returns from fixed deposit is 6 per cent, and inflation is 3 per cent, then your real return would be simply 3 per cent.
Simply put, you are getting less in terms of real value.
So, keep this in mind while parking your cash in an FD.4.
Want to reinvest your cash after it develops? Even that comes with risksAs we pointed out earlier, FDs have actually a fixed maturity term.
So, envision a circumstance where you have actually invested your cash in a 2-year term FD.
After maturity, you can either withdraw the cash or pick to reinvest.
At that point of time the interest rates may be really low.
As an outcome, you will not be able to invest again at financially rewarding rates.