Tips for Optimising Fixed Deposit Investment Using a Calculator

Posted on Tuesday, November 19th, 2024 | By IndusInd Bank

As any investment expert would recommend, diversifying your investment portfolio is always a good idea. Along with high-risk instruments (if and when they fit your risk appetite), one should always have low-risk investments to hedge their portfolio risk. Fixed Deposits (FDs) have long been a preferred choice for individuals looking for low-risk instruments.  

If you opt for a fixed deposit investment, there are many ways of optimising it and potentially increasing the returns. In this article, we will see how you can optimise your FD with the help of a fixed deposit calculator.  

Tips to Optimise Fixed Deposits Using a Calculator 

The following tips can help to make the most of your fixed deposit investment: 

1. Check for Different Tenures

For the uninitiated, the interest of an FD depends to a large extent on its tenure. Thus, in most cases, FDs with longer tenure will earn higher interest rates (until a certain duration). With a fixed deposit calculator, you can compare the returns across different tenures. Then, select a tenure that offers the best earnings while ensuring your liquidity needs are met.  

2. Compare Interest Rates

Along with the tenure, the interest rate is also important. Since the interest rate is based on various factors, it is crucial to check the interest rates for your chosen FD option too. Before opening an FD, use a fixed deposit calculator to compare the different interest rates. This will allow you to make an informed decision. 

3. Invest with a Laddering Strategy  

Instead of investing a large amount in a single FD, consider the laddering strategy. Here, you split your investment across multiple FDs with different maturity periods. This can help ensure you have liquidity at regular intervals while also enjoying varying interest rates. With a fixed deposit calculator, you can plan this strategy by calculating the returns for each FD at different points in time. 

4. Consider Compounding Frequency  

The frequency at which the bank compounds your interest impacts your returns. With some fixed deposit investments, you can enjoy compound interest on a quarterly basis. Some FDs only allow for annual compounding. With most fixed deposit calculators, you will be able to see the difference in returns based on the compounding frequency. Consider opting for FDs with more frequent compounding to maximise your earnings. 

5. Opt for Reinvestment of Interest

Banks offer the option to reinvest the interest earned on your FD. Such FDs are called cumulative FDs, as opposed to non-cumulative ones where the interest is paid out to the investor. Opting for a cumulative FD can lead to higher returns due to the power of compounding. With a fixed deposit calculator, you can evaluate the benefits of reinvesting the interest versus receiving it as regular payouts. 

6. Review Tax Implications

Interest earned (above a certain limit) on fixed deposits is taxable. By using a fixed deposit calculator, you can estimate the total interest amount and check its impact on your overall tax liability. This can help you decide whether a tax-saving FD, which offers tax benefits under Section 80C, is a better option for investment. 

Also Read: Tax Planning with Fixed Deposits- A Comprehensive Guide 

How to Use a Fixed Deposit Calculator?

Are you looking to reap the benefits of an FD calculator? Here is how to use it to make the most of it: 

1. Enter the Principal Amount  

Start by inputting the amount for the fixed deposit investment. This is the principal amount which will earn interest.  

2. Choose the Tenure

Select the duration of the FD. The tenure you choose will influence the interest rate and the overall returns. 

3. Select the Interest Rate  

Choose the interest rate offered by the bank for the specific tenure you are considering. With most FD calculators, including the one offered by IndusInd Bank, you can skip this step. The calculator will input the interest based on the tenure you select.  

4. Calculate

After entering the details, click on the ‘Calculate’ button. The fixed deposit calculator will display the total interest earned.  

Conclusion 

With the above tips, you can choose the right fixed deposit option and have a smoother investment journey. Along with the right tips and tools, you also need a solid banking partner. IndusInd Bank, with its competitive rates and flexible options, is an excellent choice for opening a Fixed Deposit account.  

The best part is that you can book an FD right now as our application process is 100% online. Customers who do not have an existing account with IndusInd Bank can also open an FD via our web application.  

Book a Fixed Deposit with IndusInd Bank now!  

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.