A fixed deposit (FD) is one of the simplest and most versatile investment products. All banks offer FDs to their customers. The depositor deposits the amount for a specified tenure with a fixed maturity amount. 

There are many investment products for any investor to choose from and each has its unique features and advantages. Fixed deposits offer many benefits and must be a part of your portfolio; we discuss the top reasons below.

1. Low-Risk Option

A well-balanced portfolio should have different classes of assets. Each asset type like gold, equity, mutual fund and FDs play a different role in the portfolio. 

While equity and MFs offer the potential of higher returns, they are also risky. FD schemes are a low-risk option, which provides stability to your portfolio and keeps your portfolio balanced. Your portfolio should have a combination of low-risk, medium-risk and high-risk investments. 

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2. Access To Credit

FD schemes can also help you access credit. You can borrow funds against your deposit without having to withdraw the funds. 

Banks offer up to 70-80% of the deposit value as a loan. Loans against FDs are easy to get and are available at competitive rates. 

If you have a low credit score or no credit history getting a loan or credit card may be a challenge. Few banks also offer credit cards against deposits.

3. Tool For Financial Planning

Fixed deposits are an effective tool for financial planning. Cumulative FDs help in wealth creation and traditional FDs provide you with a regular stream of income at required intervals. 

For goal-based savings, you can invest the required amount for a fixed term. Cumulative FDs can help you accumulate the required corpus for a specific goal like a child’s education or the downpayment of a home.

Traditional deposits pay out interest at half-yearly, quarterly or monthly intervals depending on your choice. Thus, based on your requirement, the traditional FDs can provide you with a regular stream of income. 

4. Flexibility In Tenure

Fixed deposits are available for terms ranging from a few days to a few years; FD rates vary per the tenure. Whether you want to invest for a few days or a few years, you can choose the tenure as per your choice. 

5. Guaranteed Returns

Generally Fixed Deposit with good FD rates gives guaranteed return. When you apply for a fixed deposit, you know the maturity based on the term. Guaranteed returns make FDs a safe option for all ages and income brackets.

6. Liquidity

Even though FDs are for a fixed term, if needed, you can withdraw funds when required. What’s more, you do not have to wait for funds to be credited to your account; you can access them immediately. In case of an emergency or when you need funds fast, FDs are one of the most convenient options.

7. Easy To Understand And Invest

Fixed deposits are a no-fuss product. You can invest in them online or offline without any hassle. If you already have a savings account, no additional documents are required to start a fixed deposit. The product is easy to understand; there are no hidden charges or aspects that may come as a surprise later. 


The above aspects detail why fixed deposits are a popular and beneficial product. If you already do not have FDs, you should consider them adding to your portfolio.