Investment Tips: You must know the benefits of investing money in FD, but before investing, know its major disadvantages..

Making FD in a bank can be called the most popular investment option in India. In this, you get the facility to invest according to your needs in less money. This is the reason why bank fixed deposit (FD) remains the most popular investment option.

After May 2022, when RBI started increasing repo rates continuously, banks also increased the rates of FD a lot. The situation is that FD which gave about a six percent return two years ago is now getting interest above eight percent.

Despite being a great investment option, FD has many limitations. It has many drawbacks. Therefore, before investing money in it, you need to know what are the disadvantages. As an investor, this is very important for you.

Return is low-
The first disadvantage of investing in fixed deposits is that the interest rate is fixed. That is, the interest that the bank has fixed for you remains fixed. The interest you get in other investment options like stocks or mutual funds is much more than this.

Penalty on premature withdrawal-
If you withdraw FD before the stipulated period, you will have to pay a penalty.

You do not get the benefit of a market boom-
One drawback of FD is that you keep getting a fixed interest rate till the end of the scheme period. You keep getting interested at that rate till the end. Even if the market booms, your return remains fixed. There is often a possibility of loss in this.

Lock-in-period-
When you invest in FD, your money gets locked for a fixed period. Most fixed deposits are such that you cannot break them in the middle and if you break them in the middle, you have to pay a very heavy penalty.

You will not get your money until the fixed deposit period ends. No matter how many emergencies there are, you will not have your money when you need it.

Interest is taxable-
Whatever interest you get on FD, you have to pay tax on it. You will have to pay tax on whatever interest you get.

Value of Rupee-
The return on whatever investment you make should be more than the inflation rate. Usually, bank fixed deposits do not meet this parameter. If FD does not give returns that beat inflation, then there is no point in investing in it.

No Capital Gains Benefit-
FD does not earn any capital gains. This causes you loss in the long term.

If the bank goes bankrupt-
People generally consider FD as a safe investment, but it is safe only till the bank does not go bankrupt. If the bank itself collapses, then there is no guarantee that your FD will survive.

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