5 Mistakes to avoid while investing in FD

Fixed deposits are one of the most secure forms of investment, as it offers steady returns. A large number of people in the country prefer to invest their money in fixed deposits than in stocks, because of the low-risk nature of the investment. Moreover, there are some fixed deposits that also help you save tax under Section 80C of the Income Tax Act, 1961. Fixed deposits give you an opportunity to take hold of your investment and multiply it over time. Although fixed deposits are a preferred investment option, there are some common mistakes you should avoid while investing in them. Let’s take a look:

1. Not having financial goals

Once you start planning your investments, it is important to have financial goals. Investments become easier if you are working towards a specific goal. Therefore, have clear as well as realistic goals when you open a fixed deposit, as the money will be locked in for a specific period of time.

2. Not comparing interest rates

When you decide to open a fixed deposit, you should start comparing browsing different lenders for better interest rates. These days banks are offering competitive interest rate in order to attract customers. The interest rates differ from bank and bank and therefore, you need to hunt for the one that is offering you the highest interest rate on a fixed deposit.

3. Choosing the wrong lock-in period

The amount invested in a fixed deposit gets locked in for a specific time. Therefore, you need to be careful and invest the money only when you are sure that you will not need it in the near future. The tenure of fixed deposits range anywhere between 7 days to 10 years. Hence, you need to plan fixed deposits only after considering your current and future requirements. Also, do compare the tenures.

4. Opting for premature withdrawal

If you break the fixed deposit before its maturity, you will need to pay a penalty for premature withdrawals. Generally, most banks levy a penalty of 1% on the applicable rate for partial or premature withdrawals. There are some banks that allow the customers to break the fixed deposit without charging a penalty, however, they should reinvest the fund with the same bank on a different fixed deposit for a longer tenure.

5. Ignoring liquidity needs

It must be noted that although a fixed deposit is a safe form of investment, your money gets locked in for a fixed tenure. Therefore, you should make sure that you have enough cash in liquid, as it will come handy in case of an emergency.

Fixed deposit mein invest karo salo saal, sirf in galityon se bachke raho yaa Keep the above points in mind before investing in fixed deposits, and make the best of all they offer!

Learn more about how does FD interest calculator work and also get to know what is a fixed deposit

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