Whenever we think about investment, the first question that comes to mind is what can be the best investment plan. In today’s time, earning money is not enough.
You work very hard for the money that you earn, you are entitled to earn maximum profit on that money. Today we will tell you about the investment a very simple one, which many of you definitely do in your life.
It is bank fixed deposit. Fixed deposits are one of India’s most preferred best investment plans.
A man of every age likes to invest in FDs in India. FD promises a guaranteed interest. But FD has very low returns, due to which it has very small maturity amount.
Now we will tell you how you can earn more on your savings in banks.
Let us now talk about ways that we can enhance returns on FDs.
Understand Interest calculation–
when we decide to go for FDs, we think about the interest first.We feel that the bank which is giving interest at the highest interest rate will have the highest return.
But nothing is like that. There are several ways to calculate interest on FDs.
- Quarterly ( interest calculated 4 times per year)
- Half-yearly ( interest calculated 2 times per year)
- Yearly means at the maturity ( interest calculated once per year)
Let us now explain to you how these three calculation methods affect your returns.
Suppose you have 2 banks , bank X and bank Y .
Bank X calculates interest 10 % per year on 5 year fixed deposit. It offers interest calculation quarterly.
Bank Y offers 10 % per year interest rate for 5 years and calculates it yearly.
The more often the bank calculates the interest on FD in 1 year, the more returns you will get.
Means, in this case, Bank X is calculating the interest 20 times in 5 years tenure. While bank Y is calculation only 5 times in 5 years.
So if we go for bank X, our simple FD will be converted into Best investment plan.
Research multiple FDs-
We should know about the interest rates of different FDs of different banks. And we should also keep in mind tenure as per our convenience.
Fixed Deposit interest rates can vary with different banks and in different schemes.
These are offered by banks, financial institutions and finance companies.
Generally banks interest rates are lower than other companies. But bank are safe than any other company .
So while researching bank interest, we should keep in mind whether this interest plan belongs to the bank or any other finance company.
There are many people who want to keep safe their money, so they mostly prefer bank deposits .
So if you want to keep your money safe then you can give more importance to bank FD.
Just while taking bank FD, one thing to keep in mind is what is the FD calculation scheme and what is the tenure?
Must read – How to save money : tips and tricks
Reinvest the interest –
As I told you earlier, the returns of the FD made in the bank are low. but bank Fds are safer .
Now the main question is, if it is low return plan, how can we make it best investment plan?
A bank investor is always a defensive investor. Without disturbing this defensive approach we can earn more with FDs.
Suppose, we have an FD of Rs. 1 lakh with the bank. Bank is offering 10 percent interest on it yearly.
It means, after maturity of this FD, you will get 1 lakh and 10 thousands as maturity amount by the bank.
Here, 1 lakh is your principal amount and 10000 is the interest you earned.
Now the trick is, you again go for FD of principal amount of Rs. 1 lakh, and reinvest the interest amount 10,000 with your choice.
You can reinvest it in SIP, mutual funds, bonds any where you want to earn from.
Suppose you invest it in any SIP. The SIP is doing well and it provides you 12 percent on your investment after 1 year.
Then after 1 year, you will get 1 lakh and 10,000 by the bank + mote earnings by the SIP .
This way your money earns more as compare to the case where you depend upon bank FD returns only.
Here the most important thing is that we are still in defensive investment. Means, our principal amount ( 1 Lakh ) is safe with us .You have to invest only the interest amount of FD in the riskier option.
Don’t Break your FD –
FDs are our hope for future. We don’t want to break them by any reason. But if any critical case occurs, we have to break it.
This critical case can be medical emergency. In such cases the last solution is to break our FD and fulfill medical need.
But I can tell you a trick by which you can invest heavily in FDs and in normal cases you don’t have to break them.
Banks offer a facility known as Overdraft facility . The people who are having large amount of FDs with the bank, banks offer them this facility.
In this facility bank will open an overdraft account of the customer with a limit of withdrawal. from this account you can withdraw money at the time of need. And you have to pay interest on it to bank at the time of deposit.
This is a very elementary idea. We can opt this facility to earn more.
Save on TDS–
When the interest amount exceeds than 10000 in a year, we have to pay TDS. Due to TDS the return will be low on FDs. If you have to invest more amount in FDs and save on TDS, you have to break them in small amount FDs.
But these FDs should not be in the same bank. You have to invest these in different banks. And then you can earn more on FDs maturity amount as TDS will not be deducted due to low interest amount. Then this will be a Best investment plan for someone.
Multiple FD Tricks-
For example, if you have 5 lakh amount to invest in FD, don’t invest in single FD. Suppose we invest 5 lakh in one single FD, then at the time of medical emergency, we have to break it totally. Then we have to suffer with a big loss of interest amount on this FD.
But, we can break it into two amounts, like, 150000 in one FD and the rest amount 350000 lakh in another FD.
When we will face any emergency and we will need money, we can break small amount of FD to manage our need.
Because of this FD, we will not loose our interest on big amount FD.
Loan against FD-
It is a marvelous trick to save FD interest and manage our need simultaneously.
Banks are offering a loan against FD, where banks put our FD with them upto the loan tenure and grant us the loan amount approx 80 % of the FD amount.
At the time of maturity of FD,after completion of loan period,you will get your principal amount with interest calculated on it for that period.
So these are the tricks that can make your FD investment as your best investment plan. You can follow all these tricks to earn better from your savings in bank.