Understanding potential pitfalls is crucial in optimising fixed deposit (FD) investments. Neglecting research on the credibility of banks, opting for excessively short tenures, disregarding tax implications, overlooking renewal dates, etc. are some common mistakes. You could mitigate these risks through strategies such as researching institutions, emphasising interest rates, diversifying portfolios, planning withdrawals, considering tax implications, and so on. Stay informed, plan strategically, and adapt to evolving financial goals for successful FD investments.
Before investing in fixed deposits (FDs), ensure to check the credibility of banks and financial institutions. Consider factors like insurance coverage provided by entities such as DICGC
Avoid solely focusing on safety; consider interest rates. As even a slightly higher rate can significantly impact returns over time
Choose FD tenures aligning with financial goals, balancing liquidity needs, objectives, and potential interest rate changes
Spread FDs across various tenures and institutions to maximise benefits and avoid limiting returns by investing in a single variant
Plan withdrawals in advance to prevent penalties and reduced returns, maintaining a separate emergency fund for unexpected expenses
Understand and plan for taxable interest earned on FDs, consulting a tax advisor to avoid unexpected tax liabilities
Regularly review FDs to capitalise on market changes and opportunities, preventing automatic renewal from causing missed potential returns