In February 2019, the Reserve Bank of India (RBI) has cut the policy rate after almost 18 months. It has been cut by 25 bps. This is good news for borrowers, especially for the people who are looking for a car, personal and home loans. But, this is a time of concern for the depositors because the interest rates are falling. As lending rates are falling, financial institutions would reduce deposit rates as well.
Now, the further fall or rise of the interest rates would depend upon RBI’s further policy. Depositors might be concerned that their interest income could reduce.
What should be the next step of investors?
According to experts, it is unlikely that deposit rates might go up shortly. This isn’t great news for conservative investors who largely invest in fixed income instruments, including fixed deposits.
Therefore what can such investors do?
Experts recommend that investors who are seeking comparatively risk-free returns must immediately consider started fixed deposit. Here are some reasons for the same:
Turbulent times have taken a toll and fixed deposits seem to be the best option
Economic slowdown coupled with weak investor sentiment has resulted in investors getting drawn to low risk and fixed income instruments such as fixed deposits.
Since various other asset classes seem to be either underperforming or being plagued by various issues, it makes sense for risk -verse investors to look at fixed deposits. Investors can use fd calculators available on the internet to figure out which are institutions offering the highest fd interest rates.
Strengthen financial portfolio
During the last couple of years, various asset classes have suffered volatility. This automatically means investor portfolios would have also been subjected to significant ups and downs. Over the short term, this becomes difficult for investors as they may require funds for various purposes.
Therefore they can use fd calculators to evaluate financial institutions offering the highest returns on FD and invest in fixed deposits to give stability to their portfolio.
Leverage on long-term maturity schemes to generate fixed returns
Investors who wish to park their funds in a fixed deposit should do it as soon as possible. They should invest their funds in a fixed deposit for a longer duration, like 3 to 5 years, because there are fewer chances of getting prevailing interest rates soon.
In the past, experts used to advise investors to invest in short-term schemes only. But now, the scenario has changed, and it is advisable to invest in fixed deposits with a longer duration period.
If depositors decide to wait it out for interest rates to increase, they might have to park their funds in savings accounts. This is an opportunity loss as savings accounts offer paltry interest rates as compared to fixed deposits.
Depositors must invest their funds based on their investment capacity as well as the goals they have set up. They can also approach a financial planner to seek holistic advice on financial planning and how fixed deposits play a key role in it. Depositors must realize that even though they may receive inputs from various sources, they should research and take decisions independently.