Fixed deposits have long been considered as one of the safest investment options by Indians. Though the return on FDs is lesser than that on other investment options, they come with virtually no risk. Your money remains safe with the bank while you continue to earn interest. However, the recent economic slowdown due to the Covid-19 pandemic has led to a correction in FD rates and they are currently at ab all-time low. So how do you make sure to enhance your returns during such a situation? Here we look at some of the strategies that could help you enhance your return on FDs
Compare all the Options:
While the FD return rate of almost all leading banks has shown some correction in the last few months, there are many smaller banks that offer a better rate. So before zeroing on any FD scheme, please do market research of all the available options. Compare bank FD schemes with available corporate FD offers and go for the options that suit your need. Each scheme has its own risk, tenure and interest rate and as an investor, your aim should be to select the scheme offering the best return with minimum risk. Rating provided by agencies like CRISIL could help you to understand the pros and cons of the schemes in a better way.
Go for Short Term Schemes:
Short term investment options will allow you to have the flexibility to move your funds when needed. The FD return is currently at its lowest and locking your capital in a long term scheme could limit you from rating your money in a better scheme in the near future.
Diversify your Portfolio:
Having a diversified portfolio allows investors to have the flexibility to limit their risk in difficult phases. While FDs are usually considered a risk-free option, there’s still some degree of uncertainty. So, instead of going for a large FD and putting your money in one scheme, you could divide it into multiple smaller ones to make you invest a bit safer. This will allow you to have different return rates tenure and risk limits.
Reinvest your Interest:
Reinvest the interest earned on FDs to give your sum the benefit of compounding. The interest when re-invested grow your principal thus bringing more return on the next cycle
Floating Rate FDs:
The floating rate FDs offer the flexibility of dynamic interest rates. In this scheme, the interest rate isn’t fixed and fluctuate with a reference rate that is adjusted regularly. Floating FDs allow you to avail benefits of fluctuating interest rates without the need to close and re-book your existing FDs. The rates are decided as per the movement in Bank’s Treasury Bill rates that go for auction ever two weeks with a mark-up that’s reset once a year.
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