The market wizards predict that 2020 is likely to be a volatile year for the world economy, including India due to the impending slowdown and recession. The recent coronavirus outbreak will have a major adverse impact on the financial health of all countries.

FD interest rate

In such uncertain times, you need an investment that acts as a safety cushion when you need the money and also offer risk-return trade-off, especially if your portfolio contains equity instruments. Fixed deposits (FDs) can be leveraged as short term investments, especially to meet short term or periodic financial goals within a timeline of one to ten years. You must invest in fixed deposits of financial institutions that offer the highest FD interest rate.

Here are amazing tips to make the most of your FD investment in 2020

Look for both high returns and safety

Usually, people take interest rates from banks as the only parameter of comparison of FDs. You must consider NBFC FDs which also offer healthy interest rates. The credit rating of the financial institution offering FD should be your second parameter of comparison to ensure that your FD is safe.

For instance, NBFCs like Bajaj Finance offers the highest FD interest rate up to 8.05%. Moreover, it is the only NBFC that has an international rating of ‘BBB’ by S&P Global and also the highest stability ratings with CRISIL’s FAAA/Stable rating and ICRA’s MAAA/stable rating. It aptly meets both criteria – good returns and safety.

Reinvest the principal amount and returns

Another way you can maximize returns on FDs is to reinvest both the principal amount and return immediately on maturity. This is called a cumulative deposit. You can opt for auto-renewal feature on the application form – this will ensure that FD is automatically reinvested on maturity without your intervention. The power of the compounding factor will multiply your money.

However, if you are a superior citizen or any individual looking for periodic payouts on a monthly, quarterly or half-yearly basis, then non-cumulative FDs make more sense. You can keep your principal amount invested for a longer period to let it grow and withdraw interest at regular intervals.

Invest in small monthly deposits

You can make separate deposits every month in a small amount as low as Rs. 5000 in a disciplined manner to avail current prevailing interest rate. The interest rate prevailing on the date of each deposit will be taken into consideration for that deposit. This is called Systematic Deposit Plan (SDP), a facility offered only by Bajaj Finance currently. FDs with SDP feature makes the best short term investments, especially when you want to invest in small chunks.

Submit timely returns

If the annual interest rate on FD crosses Rs. 40,000 (Rs. 5000 in case of Company FDs), then it is subject to TDS. If you are a senior citizen or housewife or fall under the low-income bracket, you can seek a TDS waiver by submitting Form 15G or Form 15H at the beginning of the financial year.

FDs make a smart choice to earn maximum returns in 2020 if you follow the above-mentioned steps wisely and consistently.

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