For the risk-averse investor, fixed deposit is an ideal instrument to park a sizable amount of money. Here, your corpus grows steadily and reliably, with minimal or zero risk, depending on the issuer you opt for. FDs provide you with access to your money at any time during the tenor, but any withdrawals you make before maturity,will attract a penalty and earn returns at a reduced rate. For investors looking to truly enjoy liquidity without any penalties, the solution is to ladder your FD investments.
By doing this, you invest a given corpus into multiple FDs with varying tenors rather than one FD. This way, you can earn interest payouts over the given window and can better leverage your finances with smart reinvesting strategies. For a detailed breakdown of why you should ladder your FD investment, read on.
Enjoy greater liquidity in a given investment window
Owing to the fact that you can invest in an FD by choosing a tenor between 1 to 5 years, laddering your investment allows you enjoy greater liquidity as compared to other safe investments like PPF, Senior Citizens Savings Scheme or even a regular FD. Since you can accurately forecast your earnings using an FD calculator, you can effectively plan your interest payout as per your needs.
To give you an idea of potential earnings, consider the following example for an FD that offers payout at maturity.
For new customers
| Investment amount (In Rs.) | Tenor (In months) | Interest rate | Interest earned | Maturity Amount |
| 5,00,000 | 12 | 7.60% | Rs.38,000 | Rs.5,38,000 |
| 5,00,000 | 24 | 7.90% | Rs.82,120 | Rs.5,82,120 |
| 10,00,000 | 36 | 8.10% | Rs.2,63,214 | Rs.12,63,214 |
For senior citizens
| Investment amount (In Rs.) | Tenor (In months) | Interest rate | Interest earned | Maturity Amount |
| 5,00,000 | 12 | 7.85% | Rs.39,250 | Rs.5,39,250 |
| 5,00,000 | 24 | 8.15% | Rs.84,821 | Rs.5,84,821 |
| 10,00,000 | 36 | 8.35% | Rs.2,71,999 | Rs.12,71,999 |
From the above two illustrations, you can see how FD interest rates vary for the tenor you choose. Thus, investing for a longer tenor can yield a higher maturity amount.
Address multiple short-term goals with investment proceeds
One of the main reasons to ladder your FD investment is because it allows you to address multiple short-terms goals. With sound financial planning, you can fund your goals smartly by investing in FDs with the appropriate tenor. For example, consider that you have an investment corpus of Rs.10 lakh and you’re looking to buy a car worth Rs.6 lakh in one year and spend another Rs.1 lakh on travel in the next.
With laddering, you can invest Rs.6 lakh in a 1-year FD, invest the other Rs.1 lakh in a 2-year FD and the remaining Rs.3 lakh in a 5-year FD. This way, when the time comes to make these expenses, you can finance them comfortably with investment proceeds and have additional earnings on hand too.
For those seeking a monthly savings option that helps them save a small amount, Systematic Deposit Plan by Bajaj Finance is a great choice, wherein you can make monthly bite-sized deposits that start at Rs. 5000 per month.
Gain access to emergency funds via efficient premature withdrawals
A notable perk of laddering your FD investment is that you always have access to your funds, should you need them in an emergency. As laddering means booking multiple FDs instead of just one, when the need arises, you can prematurely withdraw one or more of the many FDs you have, based on the amount you require.
This way, the rest of your FDs can continue earning interest uninterrupted. However, if you didn’t ladder your investment and choose to withdraw prematurely, you would have to withdraw the entire FD and pay the penalty fee based on the full amount.
Earn at prevailing FD rates when reinvesting at a higher FD interest rates
Another key reason to ladder your FD investment is to address reinvesting risks that arise from cyclical market shifts. If you were to invest your entire corpus in a 3-year FD and the repo rate were to shift favourably within that period, you would not be able to benefit from this change. However, when you ladder, a portion of your corpus will free up based on your chosen maturity dates and you can then reinvest it at a better interest rate.
As you can see, laddering your investments is a smart way to invest in an FD, especially if you’re looking to fund short-terms goals. The task now is to identify an issuer that offers a lucrative interest rate along with additional benefits. A particularly noteworthy option to consider is the Bajaj Finance Fixed Deposit as it offers generous FD interest rates to all types of investors and has other beneficial features. You get up to 8.10% as a regular investor and up to 8.35% as a senior citizen investor on FDs booked for at least 36 months with interest payable at maturity.
What’s more, laddering with this option is also simple as you can either opt for the Multi-Deposit Facility to invest in multiple FDs at once with just a single cheque. To avail these benefits and more, all you have to do is fill the online application form and authorise a Bajaj Finance representative to contact you.
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