Should you invest in fixed deposits when interest rates are fluctuating?

A fixed deposit allows you to enjoy assured earnings on your invested funds. This is because the interest earnings on your FDs are not linked to the market, so this investment option parks your funds safely away from market fluctuations. However, your FD returns depend on the repo rates, which as per the RBI guidelines can alter after every three months.

The RBI has increased the repo rates thrice this year and it now stands at 6.5%. With crude oil price on the rise and the rupee’s value dipping, experts believe that the RBI will further increase the repo rate to curb inflation. Owing to this, financial experts are predicting that the FD interest rates can increase further in the months to come.

In such a scenario, you may be wondering whether it is a good to invest in an FD now or wait for a further hike in the interest rates. If you choose to invest now, you may not be able to cash on further interest rate hike, if any. However, postponing your investment for a probable hike in interest rates is not wise either, as you will lose on the interest income until you start investing. To make the best of this situation, read on to see how you can make the most of your Fixed Deposit (FD) investments during a rate fluctuation.

  • If FD interest rates are going to be hiked

If the interest rates are expected to further rise, you can start by investing a portion of your surplus funds in an FD at the prevailing rates for a short term. By doing so, you can make the most of your savings and earn better returns on it than by just parking your money in a savings bank account. It will be prudent to refrain from wholly investing your surplus and locking in your money at the existing rates. Once interest rates are hiked, you can invest in another FD while making the most of a higher interest rate and also reinvest the proceeds of the first FD at new interest rates. This way, you can build an investment portfolio with different maturity dates and earn better.

  • If FD interest rates are not going to be hiked

In an instance that the prediction of higher FD interest rates in the future is not true, take advantage of higher rates now. It is wise to be a bit conservative and lock in your investment at the prevailing interest rate immediately. This way you will create wealth, earn, and save yourself from any regret later.

Now that you know how to tackle your investments and make the most of it in under any FD interest rate scenario, start investing now. Consider investing in FDs issued by reputable financial institutions like Bajaj Finance. Bajaj Finance Fixed Deposit is packed with many beneficial features. For instance, you can start an FD with an amount as low as Rs.25,000 and earn attractive FD interest rates. You can earn an interest as high as 8.75% when you invest in a cumulative FD for at least 36 months. Moreover, if you’re a senior citizen, you can enjoy an interest of up to 9.10% on the same FD.

Start your investment journey by calculating the maturity amount for your FDs in advance, using an FD calculator. Based on your calculations and expected returns, you can invest in FDs of varied tenors and align them with different financial needs and goals. Use these maturing FDs to fund your life goals stress-free!

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