Common Mistakes Every Fixed Deposit Investor Should be Aware Of

Fixed deposits (FD) are low-risk investment methods. It is also a stable and reliable one. With attractive interest rates added regularly to your corpus, this could be a good way for long-term wealth generation. Moreover, certain FDs can provide tax benefits under Section 80C.

However, hasty investments can lead to mistakes. This might prevent you from meeting financial requirements in the key milestones of your life.

Whether investing in online or offline FDs, the most seasoned investors can make errors. So, consider learning about them beforehand to help maximize gains. Here are 5 common investing mistakes, frequently made while purchasing FDs. Take a look.

Mistake #1: Not Hiring a Financial Advisor

Be it an online fixed deposit or otherwise, it is crucial to talk to an expert first. This is especially important for beginners. They can come up with meaningful advice, helping you in fund allocation, planning, and understanding risk profile, which can reduce your stress too. When you start right, the chances of mistakes can below.

Mistake #2: Lack of Financial Goals

It is important to set milestones and then try to tick them off. Investing aimlessly with zero knowledge of fixed deposit interest rates or other parameters does not make sense. If you are to use FD for higher studies, calculate the course fee in a few years and keep the potential inflation rates in mind. This will help you understand how much to invest in the FD to reap benefits. It can also help you achieve financial stability without having to interfere with savings or emergency funds later.

Mistake #3: Not Performing Relevant Research   

One must have a clear knowledge of, minimum tenure, loan facility, tax exemption benefits, nomination requirements, and rates and payouts beforehand. Further, you might also get an idea of the return amount by using the fixed deposit calculator beforehand. This helps you compare several FDs provided by lenders in the market, to choose the best one. Also, this helps prevent nasty surprises in the future.

Mistake #4: No Prior Planning

Pick a bank that offers up to 6.7% returns per annum.  Make sure they also have a 0.25% higher rate for senior citizens. Check the eligibility criteria and documentation requirements beforehand. Plan a lock-in period. Further, know how to apply for FD online, details required, and the pay-out options. Having all the information at hand will let you go about the process in a streamlined manner so that mistakes are avoided.

Mistake #5 Premature Withdrawal

Investors are required to pay a penalty in case of withdrawal before maturity. This can impair your savings potential. Further, it is recommended to opt for longer tenures since it can offer impressive returns and higher liquidity. Short-term returns are only good if you do not have long-term liabilities.

Avoiding these common mistakes might lead to desired results. Do talk to your financial advisor and take practical steps to match your risk profile with your investment. These are simple ways; yet quite effective, to help reach financial goals without hassle.

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