How Can Fixed Deposits Improve Your Financial Portfolio?

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Building a strong financial portfolio is a must for achieving your financial goals. It is quite like building a house - you need a solid base to ensure stability and growth. This base is built through diversification, which means investing in various instruments that offer different benefits and risk profiles.

Stocks and mutual funds are popular choices for their potential for high returns. However, this growth potential comes with the risk of market volatility, which can cause your investments to fluctuate in value. This is where Fixed Deposits (FDs) can be helpful.

FDs can offer certainty and stability to your overall portfolio. They provide fixed returns over a predetermined period that can help diversify your investments and protect your principal from unexpected market downturns.

Simply put, FDs are a secure and rewarding option for investors of all risk tolerances. This blog will explore why FDs are essential for any well-rounded financial portfolio.

What is a Fixed Deposit?

A Fixed Deposit is an investment option where you deposit a lump sum of money with a bank or financial institution for a specified period (typically 7 days to 5+ years). The deposited amount earns interest at a fixed rate, set when the account is opened. You can opt to receive the interest payout monthly or quarterly or reinvest it for potentially higher returns, according to your preference.

FDs are popular because they are among the safest investment options available. Your principal amount is secured, without any risk of loss from market fluctuations. Additionally, FDs offer a higher interest rate than typical Savings Accounts, making them an appealing option for anyone seeking steady and predictable returns.

Some tax-saving FDs even offer the added benefit of reducing tax liabilities.

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5 Ways Fixed Deposits Can Improve Your Financial Portfolio

Now that you know what an FD is, let’s explore five ways it can improve your financial portfolio:

1. Protection from Market Fluctuations

   Unlike investments tied to market changes, Fixed Deposits offer stability. This means your principal stays safe, no matter how the markets fluctuate - a major advantage for investors prioritising security. Banks guarantee returns on your FD if you stay invested for the entire term. This predictability makes FDs a great way to reduce your portfolio's overall risk.

   For instance, if you've built a portfolio that relies heavily on potentially risky investments like stocks, adding an FD can act as a safety net. Even if you're a cautious investor, FDs are a smart choice, offering competitive returns with minimal risk.

2. Advantage of Compounding

   One of the main benefits of Fixed Deposits is compounding, where you earn interest on your initial investment and the interest that accumulates over time. By reinvesting the interest from your FD, you can grow your wealth even more.

   Selecting an FD with competitive interest rates and reinvesting the returns can help you reach your long-term financial goals. While equities also offer compounding benefits, Fixed Deposits are safer for those who want to avoid market-linked risks.

3. Flexible Investment Options

   Another major benefit of FDs is their flexibility to match your financial goals.

   If you require a consistent income, you can choose an FD with regular interest payouts - monthly or quarterly. This can be a reliable way to add to your primary income.

   On the other hand, if you're saving towards a major future purchase or your golden years, lock away your spare funds in a long-term cumulative FD. This approach lets your corpus grow over the tenure of the FD, increasing your wealth accumulation.

4. Loan Against FDs

   Imagine you're experiencing a sudden financial crisis. You don't need to break your Fixed Deposit prematurely. Many banks now offer loans against FDs. This lets you tap into some of your FD's value as cash while keeping your original investment growing. Think of it like borrowing money using your FD as collateral, so you get funds without losing out on your FD benefits.

5. Tax Benefits

   The Indian Income Tax Act has a section called 80C that offers a tax benefit. It allows you to deduct up to ₹1.5 lakh per year from your taxable income if you invest in specific options. One such option is a tax-saving Fixed Deposit. While tax-saving FDs help you reduce your tax burden, they come with a lock-in period of 5 years. This means your money gets locked in for that period. You cannot withdraw your money early, take a loan against it, or use an overdraft facility during this time.

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Features and Benefits of Opening an FD Account with DBS Bank

By opening a Fixed Deposit Account with DBS Bank, you can invest in a high-yielding, safe, and flexible option that helps you grow your corpus steadily over time. Here are its features and benefits:

• Earn up to 7.50% * p.a interest on your FD for a tenure of 376 days to 540 days. Senior citizens get an extra 0.5%. (Rates may change over time. You can click here to check FD interest rates for other tenure options).
• Achieve your financial goals by investing regularly without a lump-sum payment.
• Start with just ₹5,000. The maximum investment amount is ₹99,99,999.
• Your returns are guaranteed regardless of market or political changes.
• Choose the deposit type, amount, and tenure to suit your investment needs. Set your preferred maturity instructions.
• Receive interest monthly or quarterly or get cumulative interest at maturity.
• Manage your FD account online via Internet and Mobile Banking. Update nominees and set maturity instructions easily.

Improve Your Financial Portfolio via DBS Bank Fixed Deposit

Fixed Deposits are a valuable tool that can significantly improve your financial portfolio. They offer a secure and predictable way to grow wealth while providing several advantages like protection from market ups and downs, compounding interest, and flexible investment choices.

DBS Bank’s Fixed Deposits offer competitive interest rates, flexible tenures, and a range of features to help you achieve your financial goals. Our convenient online and mobile banking options help you manage your FD Account easily.

Visit our branch (you can click here to locate your nearest branch) or contact customer support at 1860 210 3456 / 1860 267 4567 (for calling from India) or +91 44 6685 4555 (for calling from overseas) to explore our FD options and start building a stronger, more balanced financial portfolio today.

Frequently Asked Questions (FAQs)

1. Are FDs good investment?

   Fixed Deposits can be a good investment, especially if you have specific financial goals (like a child's education, retirement, etc.) and want a safe option where your capital is secure.

2. Why is Fixed Deposit better than stocks?

   FDs are better than stocks if you want to avoid risk and keep your money safe. They offer guaranteed returns, unlike stocks which can go up or down.

3. Can I withdraw money from an FD before maturity?

   Yes, you can withdraw money from your Fixed Deposit before it matures, but there may be penalties for early closure.

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