In the modern-day financial landscape, where the rate of interest fluctuates and market conditions evolve within a blink of an eye, investors are continuously searching for techniques to optimize their returns whilst dealing with risk.
One effective and most opted-for strategy is fixed deposit laddering. This strategy overcomes unique demanding situations, together with locking price range for a selected length, limiting liquidity, and exposing buyers to the interest rate fluctuations.
Today, in this article, we’ll learn everything about this investment scheme. Keep reading to find out the best application to invest in Fixed Deposits in 2024.
What is a fixed deposit? Why is it a good investment?
As the term suggests, it is an investment where you deposit a lump sum amount with a financial institution for a fixed tenure at a specific rate of interest.
Remember that the tenure here can vary from months to even years and is chosen initially.
Assured returns
FDs offer assured returns on your investment. It is a good amount as despite what the market conditions are, your principal amount and interest are secure.
Predictable income
As the rate of interest is fixed, it ensures predictable income at all times. This is quite a beneficial factor, especially for retirees or individuals who need a stable income stream.
Tax benefits
In our country, certain FDs qualify for tax deductions under Section 80C of the Income Tax Act.
What is Fixed Deposit Laddering? How does it work?
It is an investment method that includes dividing a lump sum quantity into multiple FDs with varying maturity periods. Instead of investing the entire amount in a single FD, traders create a “ladder” of FDs with distinctive maturity dates.
- Divide the investment: Break down the amount into smaller portions.
- Stagger maturities: Create them with different maturity periods.
- Regular maturity: As each of these investments matures, you have the option to reinvest the proceeds in a new or the best FD.
Top Pros of Fixed Deposit Laddering
Rate of interest optimization
Laddering allows you to take advantage of varying rates of interest over time. So, for example, if rates rise, the new FDs will benefit from higher rates, improving your overall returns.
Flexibility
The strategy offers flexibility in managing your investment portfolio. You can easily adjust the ladder based on changes in interest rates or your financial needs.
Increased liquidity
Laddering reduces the impact of interest rate fluctuations on your overall portfolio. It basically spreads the risk over multiple maturities, thereby stabilizing your returns.
(Tip: Always use a fd calculator before investing your hard-earned money.)
Best app to invest in Fixed Deposit
Bajaj Finserv! Period. If you are searching for an application to download on your smartphone to invest in Fixed Deposits, then this platform is simply the best. It is super convenient to use, and the overall user interface is quite friendly.
- Download the application on your smartphone.
- Sign up/Log in using your mobile number
- Under the investment bazaar section, go to Fixed Deposit
- Proceed as further
With just four easy steps, you are more than good to go. It is highly recommended!
Final thoughts
All in all, FD laddering is a strategic approach that effectively balances risk, liquidity, and returns. For those seeking stability and an optimized rate of interest, this method remains a prudent choice.
