Over the years every individual has grown the habit of savings. While saving our earnings, we want good returns and security. Be a new investor or an experienced one, there are numerous investment products available for everyone. Fixed deposit is an investment vehicle that offers both good returns and security. This investment product is apt for new investors due to low-risk factors as well as for experienced investors for diversifying their portfolio. What mainly attracts investors are the fixed deposit interest rates, which are generally higher than other investment products. Before you start investing in this investment product, let us discuss how fixed deposits work and how you can save your money efficiently with fixed deposits.
How do fixed deposits work
The basic concept of a fixed deposit is very easy to grasp. You invest an amount of money in a lump sum in a fixed deposit. The amount stays locked in the FD for a specific period of time and earns interest at regular intervals. At maturity, you receive your principal amount along with the accumulated interest. You can opt for a monthly, quarterly or yearly payout as well. Some FDs runs on the cumulative method, where the interest gets re-invested and earns returns along with the principal amount increasing the total FD returns. There different sorts of FDs. The basic functioning of all sorts is the same. However, they all offer some additional and unique features. Here is the list of FDs you can choose from.
● Regular fixed deposits
● Cumulative fixed deposits
● Non-cumulative fixed deposits