Fixed Deposits Types

• Standard Fixed Deposits – Money is deposited for a fixed period of time. Interest rate is higher than saving accounts.

• Tax-Saving Fixed Deposits – You get the tax exemption on fixed deposit amount up to 1.5 lacs in a year. No withdrawal is allowed before 5 years.

• Recurring Deposits – You deposit a fixed amount monthly or quarterly. And at the time of maturity, you get the amount you deposited and an income at a fixed rate of interest.

• Cumulative FD – It gives an interest rate that is compounded on a yearly or quarterly basis and paid on maturity with the principal amount.

• Non-Cumulative FD – Investors can opt for plans which give interest on a monthly, quarterly, half-yearly or yearly basis.

• Senior Citizens Fixed Deposits – These Fixed Deposits are particularly for the senior citizens of India and gives the comparatively higher interest rates.

Benefits of Investing in Fixed Deposits

• Very easy to open a Fixed Deposit Account.

• You can start a Fixed Deposit with a very minimum amount say RS.500 also.

• It gives you a higher interest rate in comparison to the other form of investments.

• This is the most secure investment. It is not affected by inflation or any other economic conditions. Once you open the FD account you will get what you were offered.

• You can choose any tenure ranging from 7 days to 10 years. The rate of interest will depend upon the tenure.

• You get the tax benefits on the return from 5 years of FD

• In case of any financial need, you can also apply for a loan against your FD.

• You can also cancel the FD at any time before the maturity subject to conditions as per your FD agreement.

Documents Required

• Identification proof like Passport/ Driving License/Any Other Government-issued document.

• Age Proof like Birth Certificate/Passport/ Any Other Government-issued document.

• Address Proof like Utility Bills/Rent Agreement/Any Other Government-issued document.

• Photographs

• Beneficiary Details

Bonds

Bonds are the financial instruments used by the private or government companies to raise money in form of borrowings with a promise to pay interest after a specific period of time. So here the investor is the lender who lends the money to the companies at a particular rate of interest.

The amount of bond is called the “Face Value”, the interest is called “Coupon” and the date on which the lending period ends is called “Maturity Date” on this day the amount to is repaid.

Areas of risk in Bonds

• Inflation Risk – In spite of inflation, the investors still get a fixed income on bonds.

• Liquidity Risk – Some bonds can be purchased and sold in major stock exchange only.

• Call Risk – The issuer may call back the funds and retires the bonds before maturity date.

• Credit Risk – If the credit worthiness of the issuer deteriorates the risk that issuer may default increases.

• Interest Rate Risk – If interest rates increase the value of the old bond may decline. New bond with higher interest rate become more attractive to invest.