Fixed Deposits (FDs) have long been a popular investment choice to secure a steady and secure return. While FDs offered by banks provide stability, corporate FDs often provide higher interest rates. This makes them an attractive alternative.
With a plethora of options available, maximising your returns requires careful planning and understanding. By leveraging certain strategies, you can make informed decisions and reap the maximum benefits.
Understanding Corporate FDs
Non-banking financial companies (NBFCs), firms, and corporates offer these fixed deposits. Here is a brief overview of how they function-
- You can invest a lump sum amount in these deposits for a predetermined tenor
- The minimum amount of investment generally varies depending on the issuer’s policies
- The tenor of these FDs typically ranges from a few months to several years
- The companies provide a fixed interest rate on your investment, which is payable at maturity
- These deposits provide higher rates compared to traditional FDs available at commercial banks
- If you opt for a non-cumulative FD, you can receive interest payments monthly, quarterly, semi-annually, or yearly
- You can even pledge these deposits as collateral to access funds during emergencies
- You can withdraw funds from these FDs before the maturity period by paying a penalty
- As per the Income Tax Act of 1961, the interest that you earn is fully taxable as per your income tax slab rates
Visit this website to browse different FD offerings and apply for one that best aligns with your financial needs.
Tips to Maximise Your Returns on Corporate FDs
Optimising your company’s fixed deposit earnings requires a strategic approach. Check out some essential tips to help you make the most of your corporate FD investments-
Opt for a Longer Tenor
Generally, corporate FDs like Bajaj Finance FD offer higher interest rates for longer tenors. Check out how you can maximise your returns-
- By opting for a longer tenor, you can potentially earn significantly higher returns
- It is important to consider your financial goals and liquidity needs before locking in your money for an extended period
- If you have a long-term investment horizon and don’t require immediate access to funds, a longer tenor can be a prudent choice
Use Callable FD Option
Some corporate FDs come with this facility. It means that you can redeem the FD before the maturity date under specific conditions. Here is how it works in your favour. If interest rates decline after you have invested, you can continue to enjoy the higher interest rate in such cases. Also, you can get instant access to funds during emergencies by paying a small penalty amount.
Consider Reinvesting the Interest
Most FDs offer the option to reinvest the interest earned. By choosing this option, you can benefit from the power of compounding in the following way-
- Your earnings will increase over time, as the interest earned will start earning interest itself
- It is essential to assess your tax implications before opting for interest reinvestment
Diversify Investment Portfolio
Diversifying your investment portfolio across different corporate FDs, as well as other asset classes, can help mitigate risk. Here is how you can build a well-rounded portfolio-
- By spreading your investments, you reduce the impact of any potential defaults or market fluctuations
- Consider investing in FDs from different issuers with varying credit ratings to create a balanced portfolio
Get Advantage of Laddering
It is a strategy that involves investing in different FDs with varying maturity dates. Here is how it works-
- By staggering the maturity dates, you ensure a steady income stream while maintaining liquidity
- This approach also helps you to benefit from potential interest rate fluctuations
- For instance, if interest rates rise, you can reinvest the maturing FDs at higher rates
Carefully consider factors like credit rating, tenor, interest rates, and risk appetite to make an informed decision. Remember, while corporate FDs offer the potential for higher returns, they also carry a slightly higher risk. Diversification is key to managing this risk.
Ultimately, corporate FDs can be a valuable addition to your investment portfolio. They can provide a steady income stream while potentially boosting your overall returns. It is essential to conduct thorough research and consider your financial goals before making any investment.