Fixed Deposits are an investment scheme offered by various financial institutions. FD rates allow one to invest their money at a higher rate of interest than savings accounts. The rate of interest varies from scheme to scheme, bank to bank. FDs are generally made for a specified period. Usually, a penalty is imposed in case of premature withdrawal of the invested money. Investing in fixed deposits is a very lucrative option, as it gives high rates of return.
Here are some common mistakes people generally make while investing in a fixed deposit:
- Not having planned Investment Goals: Before investing, it is essential for one to understand how the investment will fit into their larger investment and saving strategy. Not having a planned strategy or not taking that into account before investing in a fixed deposit is one of the worst financial mistakes a person can make.
- Not having all the necessary information: These days, various financial institutions offer different schemes with varying rates of interests and benefits. Therefore, it is of extreme importance for one to have all the relevant information before investing. A sound investment requires a lot of planned research and effort. It is essential that one does the entire research of the market place before choosing any one scheme.
- Not having a diversified portfolio: As it is said that one should never put all of his eggs in a single basket, the same goes for investments as well. A single investment may not give you very high rates of returns. Therefore it is advisable that investments should be diversified. This will allow you to reap the benefits of multiple schemes. It is further advised that you invest in schemes with varying tenure, this will allow you to term the benefits that accompany both short term as well as long term investments.
- Not taking inflation into account: Inflation implies a rise in the general price level, it impacts the value of money over time. It is important to plan your investment taking inflation into account in such a manner that at the time of maturity, you can profit despite the inflation rates.
- Not having a simultaneous Insurance: Investing doesn’t equate having insurance. While it is important to make investments, it is utmost important to ensure that you have a simultaneous insurance cover. In case of any mishaps, it is the insurance that will help your loved ones.
- Not performing regular checks: Monitoring and checking on your investment at every stage is highly recommended. Keeping track of your passbook and account statements is essential as it ensures transparency and enables you to have a clear record of the investment.
Investing in a fixed deposit is a sound financial decision, but make sure you know your way around all the minute details of the investment. A good scheme can fetch you high rates of return at the same time; an incautious decision can cause you to lose out on more lucrative prospects and can contribute significantly to making bad financial choices.