7 Strategies to Maximise Returns by Investing in Multiple Fixed Deposits
For low-risk investors, fixed deposits (FDs) offer stability with guaranteed returns, though they are not inflation-adjusted. By diversifying investments across multiple FDs, you can enhance yields and optimise returns on your funds. Here’s how to make the most of your FD investments.
1. Interest rates: Banks and FIs offer different interest rates on FDs based on the term and amount. Interest is usually good for longer terms and more significant amounts.
2. Types of FDs: FDs provide monthly, quarterly, or half-yearly interest payout options or at maturity. The interest payout frequency works, and you can get a higher return from your FD investments.
3. Compounding frequency: Tenure is the top factor in earning yield when you invest in a fixed deposit. Longer tenures are usually associated with better interest rates than short-term ones.
Seven ways to gain more in your multiple FDs:
Fixed deposits are no longer a secret, here's why and how you can get more:
1. Invest with various banks and financial intermediaries:
To reduce risk, diversify your portfolio by investing across multiple banks and financial institutions. This also means you can take advantage of the higher rates that different places offer.
2. Try different types of Fixed Deposits:
FDs are an assortment of types, so check for cumulative, non-cumulative, tax-saving, senior citizen, and flexible types of FDs. These have different pros and cons, so each type is picked according to your financial goals and liquidity needs. Use an ROI or an FD calculator to compare different FD Types.
3. Invest in Extra-Premium FDs to get benefits over & above normal maturity:
Look out for special FDs that yield more than the regular FD. Some banks have higher interest rates for senior citizens for specific time lengths. You will also notice that these are the investment schemes to increase your all-round returns.
4. FD laddering strategy:
FD laddering means investing in several FDs with different maturity periods. By doing so, you will be able to earn more returns since the next time your FD matures, you can automatically reinvest that maturity amount in fresh FDs with updated interest rates.
5. Invest in liquid/fixed Term Fixed Deposits:
Investing in long-term FDs that mature in 3-5 years will give you more returns than short-term FDs. However, don't lock in if you do not need the funds within the following year.
6. Go for various options of interest payout:
You can specify different interest payout options based on your financial requirements for the FDs. Monthly or quarterly payouts will be appropriate if you need a regular income from your investment. A cumulative option, where the interest is compounded annually and paid out at maturity, is the best choice to maximise your returns.
7. Talk to financial advisors:
If you are unsure how to optimise returns when making multiple FD investments, please speak to a financial advisor. Your financial goals, risk appetite, and investment horizon can help them advise you on the best FD investment strategy.
Conclusion
Picking the right FD type and maximising returns by diversifying your FD Investments will help you achieve your financial goals more effectively.
