Fixed Deposit, Best FD options, FD Online
In 2024, whether due to increasing inflation, currency devaluation, or reduced payment capacity, the value of what you earned ten years ago and put in a savings account has not increased but instead decreased. This is why it is often heard that investment is the only option to ensure higher returns and counter the lowering value of money over time.
If you have ever considered investing, you may be aware of the different forms of investment, ranging from fixed or recurring deposits to mutual funds, stocks, and SIPS. But are you aware that different types of investments offer different returns and pose different risks that can hamper your return prospects?
If you are someone who does not wish to risk your money in hopes of higher returns but wishes to get assured returns either on maturity or depending on the investment payout period, investing in a fixed deposit offers the most secure investment while also providing better returns compared to just keeping your money in a savings account. Are you looking for ways to invest smartly and ensure maximum return? Follow the given steps to plan and maximise the return strategically.
Keep reading to learn all you need to know about using the FD laddering strategy to maximise your FR returns.
What is fixed deposit laddering?
Fixed deposit laddering revolves around the strategy of disseminating the funds in several FDs over different periods to optimise returns and also maintain liquidity. Now, instead of blocking your entire funds into one deposit, you can simply create several FDs, with various maturity dates.
This approach’s entire objective is to allocate a balance between earning steady returns and maintaining the accessibility to funds at specific intervals. By choosing fixed deposit laddering, you can select the best FD options for you, which grants maximum and better returns.
What are some factors to consider before opting for FD online?
It isn’t easy to curate a well-defined FD laddering strategy that offers maximum return which is why it is essential to consider a few significant points in mind before you go for FD Laddering.
Here’s a quick view of the factors that you must keep in mind:
- Distribution of maturity period
Whenever you are exploring FD laddering strategy,, you must carefully plan out the distributions of maturity periods. Your idea should be to curate a proper & balanced blend of short-term, medium-term, and long-term fixed deposits.
Usually, short-term deposits do offer incredible accessibility to funds, however, long-term deposits ensure a higher rate of interest, this is why your deposits must align with all your financial goals including liquidity needs.
- Proper tax implications
Before proceeding, one must understand the tax implications of the income derived from interests from the various fixed deposits. Typically, the interest that is earned from interest is taxable according to your income tax slab.
- Requirements of liquidity
You must assess your short-term and emergency funds in order to make sure that you are left with sufficient liquidity.
- Financial Goals
You must clearly determine whether your entire focus is simply to generate income, capital preservation or a blend of both. You can simply align the FD laddering strategy with your individual goals to ensure you meet your financial requirements.
What are the benefits or advantages of fixed deposit laddering?
FD Laddering offers various advantages that could help you maximise the FD returns while maintaining liquidity.
- Greater liquidity
- Flexibility to meet short-term financial needs
- Reduction in reinvestment risk
- Tax efficiency
- Financial discipline
How can I set up an FD Laddering Strategy?
If you are wondering how to set up an FD laddering strategy, Bajaj Finserv could help you as it indicates the highest level of safety and lowest investment risk in addition to offering a concise and straightforward UI to keep note of them.
However, before setting up the FD Laddering strategy, you should follow a few steps:
● Assess financial & investment horizons
Evaluation of financial objectives like short-term liquidity needs, any future expenses, and risk level.
● Choose maturity periods
You must select maturity periods for each deposit based on various financial requirements. You can also use FD online calculators to compare multiple options and choose the one that best fits your requirements.
● Maintain consistency
You should keep reviewing the FD maturity dates and reinvest the principal amount with the earned interest in new FDs with longer maturity periods.
Five tips to maximise FD laddering
- Keep a keen watch on the trends of Interest Rates
- Prefer to reinvest the maturities
- Explore various FD options
- Get Expert Assistance from Bajaj Finserv
Conclusion
The FD laddering strategy is an unbeatable way to maximise FD returns while maintaining liquidity. It is surely one of the smartest ways to manage your FD funds by planning and structuring your future and present investments and aligning them with your investment objectives. This approach could help you accumulate wealth, combine returns, enhance liquidity, and achieve financial goals.
