Go For Short-Term Investment: Since there is a high chance that the rates are likely to go up in the near future, you could invest for the short term, considering that the interest rates will rise in future. “The interest rate on short term deposits may go up in the short term amid the inflation being on the higher side due to rising oil prices at global level and escalation in geo-political tensions. The effect on long-term deposit rates will only be if inflation sustains in higher trajectory,” says Multani.
Use To Create Emergency Corpus: Short-term FDs can also come in handy to park your emergency corpus, irrespective of the prevailing interest rates. “Investors can consider parking money they need in the near-term or the emergency fund they have built for themselves in fixed deposits,” Harshad Chetanwala, a certified financial planner and co-founder My Wealth Growth, a financial planning firm. Keeping your emergency corpus in the savings account is not advisable as you may end up using the money for other purposes if you are not disciplined enough.
Good Choice For Novice Investors: New investors may have money to invest but it may take some time for them to understand the market complexity. For them, FD may be a good option to understand how investments work. “The interest rates offered on FDs are higher than those for savings accounts, providing the better returns. Since there is no market involvement in FDs, the risk factor is extremely low,” adds Multani.
Consider The Consequence: While having good returns on FD brings relief to investors, one needs to be prepared for the consequence it may have on other sectors. “If interest rate is continuously going up, they will have some impact on real estate sector as banks also start increasing the interest on home loans,” adds Multani.