Bank FD: Check what fixed deposit Calculator speaks about your portfolio?

Bank FD: Wealth creation has always been a long-term exercise and is primarily determined by an investor's asset allocation strategy. As investors one can choose from equities, bank fixed deposits (FD), gold, real estate, debt, etc. But, an investor should ideally allocate one's money across different asset classes to ensure one's minimize its risk and consistently increase its wealth. However, most of the asset classes are becoming increasingly volatile due to a combination of factors – dollar fluctuations, geopolitical tension, volatility in oil prices, etc. While most of the asset classes are prone to market volatility and come with their own set of risks, bank FD ensures that the investor gets guaranteed returns and demands very little effort all without ever putting one's principal at risk.

Speaking on how does Bank FD works for an investor in long-term Sachin Sikka, Business Head - Retail & Corporate Liabilities at Bajaj Finance Limited said, "Fixed Deposits work on a simple principle — high liquidity and lower risk along with fixed returns. One of the primary advantages of bank FD is that it protects your capital in the long run and also gives you assured returns. Flexibility is one more element that makes this asset class an attractive one. The tenure of a Fixed Deposit can range from 7 days to 10 years, giving you ample flexibility. Longer-term FDs yield higher interest rates than short term ones. It just makes much more sense for you to park your money in a 10 year FD to ensure maximum gains on your investment."

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Sikka went on to that in today’s digital age, FD can be bought within a few clicks with minimum documentation. One more crucial choice that one has to make is to whether invest in a Bank FD or a Corporate FD. "Historically, banks have offered FDs at a significantly lower interest rate as compared to company FDs.  Company deposit rates are generally 50-100 bps higher than well-established bank FDs; senior citizens can earn 25-40 bps more than the normal rates on offer. However, you should choose a company deposit, which has the best credit rating from agencies like Crisil, ICRA among others," said Sikka of Bajaj Finance.

However, robust our portfolio might be, it is always wise to safeguard a significant portion of your saving capital. Whether you are risk-averse or a risk-taker, fixed deposits are a form of investment that suits all and hence, ideally, one should have at least 20 percent of their investments in Fixed Deposits. It is one of the best hedging tools that balances your overall investment portfolio.