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Having a robust investment portfolio is all about balancing gains with stability. Although stocks, mutual funds, and other high-return assets offer more growth potential, they also carry high risks. Thus, it becomes crucial to add a stable element to your strategy to maintain a well-balanced portfolio. A Fixed Deposit (FD) can provide that stability and offset the risk that comes with market-linked instruments to a great extent.
You simply deposit a lump sum of money for a fixed period, which can range from 7 days to 10 years. During the tenure, your locked funds earn a fixed interest rate, typically higher than any regular savings account. At the end of the term, you receive your initial deposit along with the accumulated interest.
Let’s understand the role of fixed deposit investments in a diversified portfolio.
Stability and low risk
Diversification is not only about investing in different asset classes. It is also about how these assets interact with each other. Fixed deposits, with their low correlation to equities and commodities, offer a diversification benefit that can reduce the impact of volatility on your portfolio.
This stability is particularly crucial during economic downturns or highly volatile periods when market-linked investments might be underperforming.
Multiple payout options to support cash flow
When you open a fixed deposit account with IndusInd Bank, you not only enjoy best-in-class interest rates but also the option to get multiple payouts. Whether it is monthly, quarterly, half-yearly or yearly, the choice is completely yours. You can book an FD from your home with a 100% digital process and enjoy benefits like:
- Paperless process requiring only PAN and Aadhaar details
- Auto-renewal option
- Book a bank deposit of any amount with video KYC
- 5-year tax-saving FD to save tax
The interest payout option of IndusInd Bank Fixed Deposits is highly useful for retirees or those who want a consistent income stream to meet their regular expenses. This way, even if a part of your portfolio is tied up in growth-oriented assets like equities or mutual funds, another portion in FDs works to offer constant financial support.
DICGC insurance means zero risk up to 5 lakh
Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India. It insures bank deposits, including FD investments, up to ₹5 lakh per depositor per bank. The DICGC insures both the principal and interest amount.
This insurance highlights the role of fixed deposits as a risk-averse element within a diversified portfolio. After all, you get a safety net that works along with the higher-risk nature of other investments.
Tax-saving FDs for fiscal efficiency
Tax-saving fixed deposits allow you to claim tax deductions of up to ₹1.5 lakh annually under section 80C of the Income Tax Act, 1961.
They come with a mandatory lock-in period of five years but offer dual advantages, i.e., reducing your taxable income while earning high, FD-like fixed returns. This way, you boost your tax savings and create a diversified portfolio that supports both growth and stability.
Achieve your short-term and long-term goals easily
Using a laddering strategy with FDs not only helps you create a diversified investment portfolio but also fulfils both short-term needs and long-term ambitions. FD laddering means dividing your investment amount into multiple FDs with varying maturities.
This method capitalises on fluctuating interest rates over time and offers periodic liquidity. You can use the matured funds to reinvest at higher rates or meet planned financial obligations without disturbing the rest of the portfolio.
Make sure to use an FD interest rate calculator to estimate your maturity earnings, choose the right tenures, and reinvest strategically. When executed smartly, an FD laddering strategy can help you balance safety, returns, and liquidity in your portfolio.
Key takeaways
FD investments boost the diversification and resilience of an investment portfolio by reducing risk, providing stability through capital preservation, generating regular income, and offering multiple payout options.
To maximise your FD earnings, make sure to keep certain things in mind. You should monitor interest rates, choose an FD with the highest rate possible, use laddering strategies, and leverage tax-saving options. These methods can turn your fixed deposit into a tool that diversifies your portfolio and offers growth in the long term.
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