Investment Tips: If you don’t want to take any risks with your investments, you can turn the FD scheme into a bumper returns machine. However, for this to happen, you need to change your investment approach towards FDs and aim for long-term wealth creation goals.
If you are an investor who prefers safe and guaranteed return schemes, Fixed Deposits (FDs) are likely a part of your portfolio. FDs offer guaranteed returns, but they may not be high enough to beat inflation in the long term. Therefore, most financial experts recommend including schemes like mutual funds in addition to FDs in your portfolio.
But if you prefer to avoid any investment risks, you can still make FDs a high-return machine. This requires altering your FD investment strategy and focusing on long-term wealth creation goals. This way, you can accumulate a considerable amount through FDs. Learn how FDs can become a source of substantial wealth:
This technique will work
Laddering can be a very effective technique for generating substantial returns from FDs. Instead of fixing a lump sum amount in one FD, you spread your investment across multiple FDs with different maturities. For example, if you have 5 lakh rupees, instead of making a single FD for 5 lakh rupees, you create five FDs of 1 lakh rupees each, with maturities of 1, 2, 3, 4, and 5 years. This way, one FD matures every year, providing you with adequate liquidity.
This is how you get benefit
You have fixed your FDs for 1, 2, 3, 4, and 5 years. In this scenario, your first FD will mature after 1 year. Reinvest it for another five years. The following year, your second FD will mature; reinvest it for another five years as well. Continue this process, allowing one FD to mature each year and reinvesting it for five more years. Using this method, you will accumulate a substantial amount through FDs over the next 10 years.
Very useful for retired people
FD laddering is especially beneficial for retirees. After an FD matures, they can utilize the interest earnings and reinvest the remaining principal. This ensures they receive periodic interest income while their principal investment remains secure.
