While investing in fixed deposits (FDs) through the Moneycontrol platform, you have the option to diversify your investments across four financial institutions, including Bajaj Finance, Shriram Finance, Utkarsh Small Finance Bank and Shivalik Small Finance Bank. Our endeavour is to add fixed deposit schemes from several other banks and non-banking finance companies (NBFCs), which will help you diversify your fixed deposit portfolio.
Let’s discuss steps to diversify investments with FDs.
Invest across multiple banks
Lately, there have been restrictions from the Reserve Bank of India (RBI) on some banks to withdraw an amount from deposits and savings accounts because of financial constraints. To reduce the risk associated with a single bank’s financial stability, you should prefer to invest in FDs from different banks and financial institutions. This way, your FD investment will not be concentrated in one financial institution, thus reducing risk.
The central bank secures deposits in public sector banks, private banks and small-finance banks. The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the central bank, guarantees investments in fixed deposits of up to Rs 5 lakh.
Moreover, the NBFCs associated, like Bajaj Finance, hold a high AAA/Stable rating by CRISIL, and Shriram Finance FD is rated AA+/Stable by ICRA.
Also read | MC explains: Why smaller FDs work better than one large FD
Tenure diversification
You can invest in FDs with varying tenures, ranging from short-term to long-term. For instance, on our platform, you can prefer to invest in Utkarsh Small Finance Bank for a one-year tenure, or Shivalik Small Finance Bank for a two-year tenure. We have FDs from Bajaj Finance and Shriram Finance with three-year tenures as well.
Interest payout option
Look to invest in FDs with different interest payout options, such as monthly, quarterly, or at maturity. Investing with this method will provide you with a regular income stream and help manage your cash flow.
You can now Invest in Fixed Deposits on Moneycontrol app.
Laddering strategy
Investing in FDs with a laddering strategy can address your liquidity needs. Put simply, this strategy allows you to spread your FDs across timelines. For example, if you have Rs 5 lakh to invest in fixed deposits, make five fixed deposits maturing over one, three and five years, provided your financial goals permit. If you keep doing this at regular intervals, you will have fixed deposits maturing at regular intervals providing liquidity.
Even if you need money in the interim period, you can opt for pre-mature withdrawal only to the extent of the money required, if you have staggered your investments with the laddering strategy.
Laddering your FD will also help you take care of the re-investment risk.
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