Bank fixed deposits have been historically considered as an ideal and risk free investment avenue. Your investment portfolio shall comprise of bank FD’s in order to negate the risk in your portfolio. Majority of savings of middle income households are invested in bank fixed deposits. Bank FD’s have been the preferred investment route on account of following reasons:

Less risky:

Bank FD’s are always considered to be less risky as compared to the other investment avenues. Deposits in the banks offer you the security of your capital something which equities and other asset classes don’t provide.

Guarantee of capital:

A certain portion of your deposit is guaranteed under a deposit guarantee scheme. Thus, your investment is sort of insured against any unforeseen contingencies.

Liquidity:

You can redeem your deposits anytime you want. A minor percentage may be deducted from your FD’s.

Fixed returns:

Returns on your fixed deposits are fixed in nature and not market linked. Since the fixed deposit returns are not market linked, it makes it less volatile vis-à-vis the investment in equity.

Availability of options:

While opting to invest in a fixed deposit, there are lo of options available to you. You can either invest in a plain vanilla fixed deposit or a recurring fixed deposit. Also you can get a flexi account option. In case of flexi account, you have an option to withdraw a certain portion of their funds as and when they want to. Also, you have a sweep facility; under which if your balance in the account exceeds the predetermined limit, it is automatically invested in fixed deposits. There is also an opposite of sweep option i.e. the reverse sweep. If your savings account balance fall and if you do no have sufficient funds, a portion of fixed deposits will be transferred in your savings account.

In addition to the above, investment in bank FD’s also entitles you to get tax deductions as well.

You can invest in FD’s of any bank, although nationalized banks are considered to be lot safer. You can opt for a bank who is giving highest interest rates and who has good reputation in the market.