Fixed deposits or FD investments have always been tricky and, for investors to really prosper, what is required are personal attention, consistent planning and an ideal asset mix. A bank depositor needs to have clear-cut financial goals that need to be achieved at various stages of life. There are important milestones that one needs to plan for – higher education, buying property, first vehicle, marriage, travel, family planning, child’s education, retirement, etc. These goals could be achieved if you plan sensibly and start investing through bank FD at an early stage.

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Speaking on wealth creation through fixed deposits, Sachin Sikka, Business Head - Retail & Corporate Liabilities at Bajaj Finance Limited said, "Wealth creation has always been a long-term exercise and is primarily determined by your asset allocation strategy. As an investor, you can choose from equities, fixed deposits, gold, real estate, debt, etc. the options are way too many. You should ideally allocate your money across different asset classes to ensure you minimize your risk and consistently increase your wealth. However, most of the asset classes are becoming increasingly volatile due to a combination of factors – upcoming Lok Sabha elections, dollar fluctuations, unrest between countries, volatility in oil prices, etc. While most of the asset classes are prone to market volatility and come with their own set of risks, fixed deposits (FD) ensure that you get guaranteed returns and demands very little effort all without ever putting your principal at risk."

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Sikka went on to add that the Fixed Deposits work on a simple principle - high liquidity and lower risk along with fixed returns saying, "One of the primary advantages of FDs are that they protect your capital in the long run and also give 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."

In today’s digital age, Bank FDs 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 rates as compared to company FDs. Company deposit rates are generally 50-100 bps higher than those of 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 that has the best credit rating from agencies like Crisil, ICRA among others.

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 is 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.