Why Fixed Deposit (FD) is not a good Option for Investors

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When it comes to investing, most people tend to choose safe options like fixed deposits. Although fixed deposit is a safe investment option, it offers low returns. People often compromise on high returns because of lack of risk taking appetite.

Investors should not put money into FDs for long terms. The reason behind this is that interest rates could go up due to rising inflation at least in the next one year or so and in such a case, the risk of losing out is high.

While subscribing to fixed deposits, people usually do not take inflation into consideration. With rising inflation money loses value, because of growing inflation, there would not be any significant increase in the purchasing power.

The current inflation rate is almost 5% which means that your money is constantly losing value and if the inflation rate remains the same in future, the interest you earn on the FD investment won’t matter much as your purchasing power won’t be any bigger.

In fact, this inflation will eat away your returns and despite investing for such a long period of time, you wouldn’t gain much

Currently, most FDs offer an interest rate of 7 to 8 per cent max which is not much as some other investment options like debt mutual funds can help you earn 10 to 18 per cent interest.

Alternative Options to Invest

  • Mutual Funds
  • Index Fund
  • Capital Market
  • Government Bonds
  • Blue-chip Stocks
  • REIT

Investors should also consider risk factor associates with other options.

The article is for general information, not for solicitation.

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Credit To: The Voice of Finance

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digitalprak

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