A Guide For Young Investors To Grow Funds with Fixed Deposits (FDs)

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As a young investor, you might wonder how to balance saving and spending in a way that works for your goals. Whether saving up for a dream gadget, planning a trip with friends or building an emergency fund, can feel like navigating uncharted waters.

With so many options for investing, it’s easy to feel unsure about the risks and what’s right for you. But what if there was a way to grow your funds steadily, with minimal risk and maximum peace of mind? Let’s explore an approach that’s been trusted by investors for years.

The importance of fixed returns for young investors

When you’re just starting out as an investor, it’s easy to get caught up in all the flashy options that promise big rewards. But let’s be honest - dealing with ups and downs can get stressful, especially when your goals depend on steady growth.

That’s why fixed returns are such a big deal. They give you stability and let you grow your money without constantly worrying about what the market’s doing. It’s a simple and reliable way to keep your savings on track. For young investors, this kind of peace of mind is priceless.

Fixed deposits are young investors

Fixed deposits are one of the simplest and most reliable ways to grow their savings. By parking your money in an FD, you lock in a fixed interest rate for a specific period, ensuring steady and predictable returns. It’s like giving your money a safe space to grow without worrying about market ups and downs.

Key features of fixed deposits

Here’s why fixed deposits are a smart choice for young investors:

1. Guaranteed returns: Unlike market-linked investments, FDs aren’t affected by volatility. This ensures your money grows at a steady, fixed rate, making it easier to plan for goals like buying gadgets, funding trips or building an emergency fund.

2. Flexible tenure options: You can choose a tenure that suits your needs, whether it’s a few months or several years. This flexibility is great if you’re saving for both short-term plans (like festivals or weddings) and long-term goals.

3. Low risk: FDs are one of the safest investment options since they’re not tied to the stock market. For young investors who might not be ready for high-risk investments, FDs provide peace of mind while still offering growth.

4. Regular income options: You can opt for periodic payouts (monthly, quarterly, etc.), which is perfect if you’re looking to supplement your income for recurring expenses or reinvest to maximise your savings.

5. Loan against FD: Need cash urgently? FDs allow you to borrow against your deposit without breaking it. This ensures your savings stay intact while giving you access to funds when needed.

6. Tax-saving options: Tax-saving FDs with a 5-year lock-in period can reduce your taxable income under Section 80C. It’s a double benefit—your savings grow, and you save on taxes.

7. Compounding benefits: Reinvesting the returns on an FD can compound your savings over time. This makes it a smart choice for long-term wealth building. For young investors, fixed deposits are like a financial stepping stone - simple to understand, safe to use and reliable for building a secure future.

Tips for growing funds with fixed deposits

Start with a small amount and increase your investment over time.
Choose an FD tenure based on your financial goals - short-term for quick access, long-term for consistent savings.
Compare interest rates across banks and financial institutions before investing.
Use the auto-sweep feature to automatically transfer surplus funds into FDs.
Reinvest the returns instead of withdrawing them to maximise growth.
Split your investment into multiple FDs with different tenures to maintain liquidity.
Understand the penalty structure for premature withdrawals and plan your tenure accordingly.
Track maturity dates and renew FDs strategically based on current interest rates.

Earn up to FD like interest on your funds with a Kotak811 Savings Account

Fixed returns are a simple and safe way for young investors to grow their money. With a Kotak811 Savings Account, you can earn fd like interest through the smart auto-sweep feature. Here’s how it works: when your account balance goes over a set limit, it automatically moves the extra money into a Fixed Deposit.

This means you earn higher returns without doing anything extra. Plus, you can take out your money anytime you need it. It’s an easy, modern way to make your savings grow while keeping things flexible.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.