Why should you invest in Fixed Deposits?

Charlotte Miller

Updated on:

Why should you invest in Fixed Deposits

Fixed Deposits are considered the safest and oldest investment instrument banks and financial institutions provide. FD interest rates are higher than the interest provided on Savings Account balances. You should diversify your investment portfolio into numerous fixed- and variable-income sources. 

FDs are a regular income investment source. With attractive Fixed Deposit interest rates provided by several issuers, FDs are a popular financial instrument for investors. Here are the reasons to consider FD Investments:

Easy access

Opening an FD is an easy process. You only need to complete your Know Your Customer, submit the relevant documents and open an FD with your preferred bank. You can also do so through the Banking app from your home or workplace.

Offers premature withdrawal

Opting for a premature withdrawal facility can close your Fixed Deposit Account even before it matures. During financial crises or emergencies, this option is a massive relief. But it comes with some penalties. 

Features quick renewals

Quick renewal is the most convenient option when considering the different benefits of FDs. It assists you in wealth creation and building a profitable financial portfolio. 

High-interest rates

Banks provide higher FD interest rates than other risk-free investment instruments. These instruments include Treasury Bills or Government Bonds. The return-to-risk ratio is highly favourable for FDs. 

TDS limit 

The income earned from an FD only attracts TDS once it crosses a specific limit. You can also submit a form to eliminate TDS. Once submitted the form, the bank does not deduct TDS from the FD income. This generates a better sum when you make the FD investment.

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FDs are more flexible in many ways, like tenure. For example, you can open a Fixed Deposit for a week or up to 10 years. You can choose any investment timeframe in FDs. You can also select the best pay-out option for interest: quarterly, half-yearly, annually or cumulatively. 

Sweep-out facility 

The sweep-out facility is quite exciting. By enabling this service, excess funds up to a specific limit get covered in an FD. This converts the funds from a Savings Account into high-interest-earning funds. This service builds wealth by storing your funds in the Savings Account. 

Easy availability

Opening an FD with banks offering a competitive interest rate is simple and easy. You can also open them online, either on the smartphone or Net Banking portals.


The reasons state that FDs are an excellent source of income and provide decent returns. Hence, they should be a must-have investment in your portfolio.