Investment Tips: Know about not only the advantages but also the disadvantages, after that make the investment decision..

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Fixed Deposit (FD) is one of the most popular investment options in India. Many consider FD as the best investment option. They invest a significant part of their savings in FDs. But what is FD? FD is a type of deposit in which money is locked for a fixed period. However, the tenure for FD is decided by the investor person. This period can generally range from 7 days to 10 years. All banks offer FDs at different rates. Opening an FD account is very simple and can be opened both online and offline. But is investing in FD the best option? You should also know about its disadvantages.

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Reduction in interest rates
FDs have many advantages, but interest rates do not move in line with inflation. This means that in some cases, they will deliver returns below the rate of inflation. Interest rates for FDs have risen in recent times, but their returns are still much lower than those in the stock market or mutual funds. This has reduced the attractiveness of investing in FDs.

Fund gets locked
FD Your money gets locked for a fixed period. These funds are not available for your use unless you withdraw the funds prematurely. FDs are not liquid at all and cannot be easily converted into cash. On the other hand, in shares or mutual funds, you can withdraw money whenever you want.

Withdrawal penalty
Banks levy penalties on depositors who prematurely withdraw their fixed deposits. This penalty is in the form of a lower interest rate. That is, suppose the tenure of your FD is 10 years and you want money after 5 years, then the bank will allow you to break the FD, but then will give less interest instead of the fixed interest rate.

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No tax benefit
The interest earned on FD is added to the taxable income of the investor. No deduction is available on any interest earned. However, senior citizens get a rebate of up to Rs 50,000 on interest. Therefore, there will be a better option like PPF, whose interest is also tax-free.

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