A fixed deposit is a sum of money you place in a bank account for a fixed time period in order to receive a fixed interest rate in return. It’s called ‘fixed’ because you agree to leave your money in the account for the full tenure of the fixed deposit. As long as you do not withdraw your money, the interest rate is fixed. Unlike some other investments, you’re technically still able to take your money out of fixed deposits, but as a result, you might not receive any interest or if you do, it’ll be less than what the bank had initially agreed.
Fixed Deposits are a safe investment
Fixed Deposits (FD’s) are a safe place to leave your money. Compared to other investment products, putting your savings in FDs pre-determine your returns and you can have your initial capital guaranteed.
FDs are suitable for short to medium term investments
Fixed deposits are not a good option for long term investments (> 5 years) as there are other investment products that will give you a better return. It’s best if you use fixed deposits for your short to medium term/ emergency savings (between 0-5 years).