September 7, 2017
What Mistakes Should You Avoid While Investing In Fixed Deposit?
People usually hesitate while investing their funds as they don’t want to end up losing their money. Investments always involve risks but investing in a right place can always help you earn higher returns. Since our childhood, we have been taught to save money so that we can utilise it at the time of an emergency.
Though saving is an age old method, investing your funds these days can help you earn higher returns. You might have some surplus funds coming from a business profit or from a salary hike or even from inheritance. No matter how you receive the surplus money, investing them can always help you earn higher profits over it. When it comes to investments, people usually hesitate to invest their funds as it involves risk. But if you park your funds in the right place and at the right time, you are likely to earn benefits from it.
Fixed Deposits is a major and a commonly preferred way to invest funds. Though fixed deposits are considered as a safe investment option, there are times when you can make some mistakes while investing in a fixed deposit. These mistakes can get you in a huge trouble. Although fixed deposits have less risk involving factors, it is still important that you must avoid these mistakes while investing your funds:
● Using all your savings:
At times, people resort to investing all their savings in the hopes that they will earn higher returns in the future. Even though you will be getting higher returns in the future, you should not invest all your savings in a Fixed Deposit account. It is a known fact that you can only withdraw funds from a Fixed Deposit after it gets matured. Thus, when you invest all your savings in a Fixed Deposit, you will have no financial backup whatsoever. In case if you need money urgently, it can get difficult for you to arrange funds if you don’t have a financial backup. In such scenarios, you might have to break your FD which is not an ideal situation to be in.
● Don’t ignore the liquidity term/conditions:
In case if you are stuck in a financial emergency and need some urgent funds, then you can use the money that you have invested in Fixed Deposits as an option. Though a Fixed Deposit account can be more liquid than other asset options, you cannot withdraw funds from your Fixed Deposit account. Fixed Deposits restrict fund withdrawal before its maturity. In such a situation, you can only break your Fixed Deposit to liquidate your funds, but breaking your Fixed Deposit will lead you to pay a penalty.
● Not being assured of your returns:
Before you invest your hard-earned money in a Fixed Deposit, it is essential that you have checked and compared all the prevailing rates in the market. Compare all the prevailing prices in the market and select the lender which provides you with the best rate of interest. Evaluate the returns by using various online tools like FD Calculator. This will help you to determine your earnings and you can do so within a few clicks.
● Compensation for inflation using an FD:
If you intend to increase your purchasing power, a Fixed Deposit is not the greatest idea. Fixed Deposit interest rates have been influenced in the recent times. But before you invest, it is essential that you stay aware of all the latest happenings in the market.These are some mistakes that yo should avoid while investing in a fixed deposit to have safe investment and earn higher returns in the future.