Utility News Desk !!! People find many ways to invest. Where they can get good returns on their investment. For this, different people invest in different places. Some have money in the stock market. Some deposit money in mutual funds. Some make FD in the bank. But most people consider FD as a safe investment. For some time now, many banks have increased the interest rate on FD.
That is why many of you are considering FD as a better option as an investment. Many elderly people, especially those who are taking pension, invest their money in FD so that they can get timely returns. When it comes to returns on FD, FD laddering is one method by which you can get higher returns on your FD. Let us tell you how this method works and how it can benefit you financially.
FD laddering is actually a strategy of investing money in FDs. Which helps you get higher returns. Instead of investing your entire money in FDs. Invest some amount in different FDs. Which have different maturity dates. With this you create a ladder. You keep getting funds from time to time and along with this you also keep getting interest continuously.
According to BankBazaar AGM Ravi Kumar Diwakar, in FD laddering you can open different FDs for a period of 1 to 5 years. Whose maturity dates will be different. In this way your FD will mature after every one year. Due to which money will keep accumulating with you. If you want, you can withdraw the money or you can reinvest the money.
For example, if you open an FD of Rs 1 lakh for a period of one year, the interest rate is 5%. While the inflation rate during this period is 6 percent. So in such a situation, the return you will get will not be able to compensate for the impact of inflation. But if you open different FDs at different times at increasing interest rates of 5%, 7% and 8% under FD laddering, then you will get a return higher than inflation.
Increased liquidity: When your FD matures at shorter intervals. Then after a period of time, you will have accumulated funds. Which can be useful in sudden expenses. Along with this, you can also invest this fund in other places.
Benefit of interest: If the interest rate of FD increases, then you can invest again with a higher interest rate. But only when the interest rate is low. Due to which you keep getting more interest on the investment made earlier.
Regular income source: If you invest in multiple FDs, you keep getting interest on different FDs. This becomes your regular income source. This is very good for those who want to get regular income without taking any risk.
Easy to maintain: After investing money you have to monitor it frequently. But FD laddering is a very simple strategy. Here you do not need to pay much attention. Once you set up the FD, it keeps working automatically and provides you financial stability.
Interest Rate: Current interest rates. It is important to take care of these. If you invest under FD laddering strategy. So when the interest rate goes up or down then you avoid loss. But when you mature in HD. So while reinvesting you need to look at the recent interest rates.
Pay attention to tax: The income you get by investing in FD is taxable. Which tax slab do you fall in? Accordingly, you should take care that the return of HD is not affecting your total return. For this, you can consult a tax advisor. So that there is no problem in investing.
Early withdrawal: Usually if you break FD before maturity date in any bank, many banks impose penalty on it. So when you invest in FD, first check your liquidity. So that you do not have to break HD suddenly.
FD laddering is a smart strategy to get higher returns by investing in FDs. Whether you are a risk-averse investor or someone who wants stable returns, or someone who wants to diversify their portfolio, then FD laddering can prove to be a good option for those people.