How to Invest a Lump Sum of Money?
If you are looking to invest a large sum of your reserve cache of funds and wish to reap sound financial gains, investing in fixed deposits is an ideal investment opportunity.
For example, if you invest a sum of Rs. 1 Crore, the Rs. 1 Crore FD interest per month can vary from 3% to 6%, depending on the investment tenure. The interest pay-out is flexible when you invest in an FD – either monthly, quarterly, half-yearly or annually. Senior citizens investing in FDs can expect a slightly higher interest pay-out of 0.15% to 0.25%.
Types of FDs
There exist a multitude of FDs in the market. If you wish to invest in an FD, you may choose from the following:
- Cumulative Fixed Deposit: If you opt for this kind of FD, you will receive interest only at the time of maturity, and will not be eligible for interval-based interest payouts. The tenure for this FD ranges from 1 to 5 years and is mainly recommended for those not looking for regular interest payouts.
- Non-Cumulative Fixed Deposit: If you opt for this kind of FD, you will receive interest pay-outs at regular intervals of time. The tenure for this FD ranges from 1 to 5 years and is mainly recommended for those seeking a regular source of income in the form of routine interest payouts.
- Company Fixed Deposits: This form of FD is generally offered by NBFCs, often at a higher rate of interest. This FD is generally meant for companies that possess a good credit rating.
- Senior Citizen Fixed Deposits: This FD is meant specifically for senior citizens, i.e, those above the age of 60, and offers the dual benefit of higher interest rates, and flexible tenures.
- NRI Fixed Deposits: This FD has been created specifically for NRIs, OCIs, PIOs, and NROs, offering a much higher rate of interest as compared to traditional savings accounts. These FDs come with a fixed tenure and accept payment in the form of NEFT and RTGS payments from NRO bank accounts.
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Systematic Deposit Plans
A Systematic Deposit Plan amalgamates an FD and a Systematic Investment Plan (SIP). There exist two forms of Systematic Deposit Plans:
- Single Maturity Scheme: This scheme provides you with the option of receiving the maturity amount of all your FDs on a single day and can provide you with a lump-sum amount on maturity.
- Monthly Maturity Scheme: This scheme provides you with monthly maturity pay-outs, on your FDs.
Reasons for Investing in Fixed Deposits
- Reliability: Check for an FD that is certified by ICRA’s MAAA (stable) rating and CRISIL’s FAAA/Stable rating.
- Flexibility: FDs offer flexible tenures, ranging from 7 days to 60 months.
- Laddering: You can opt for laddering your FD to maximize your returns.
- Low Minimum Investment Amount: You can opt to invest in an FD with an amount as low as Rs. 1000.
- The convenience of Application: Many financial institutions offer online services; you can open an FD in a hassle-free online procedure.
If you wish to invest in an FD, you must (a) be at least 18 years of age, (b) an Indian citizen, and (c) can be a salaried individual, self-employed professional, non-professional, Hindu Undivided Family, sole proprietorship, partnership, or a company.
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Investing in an FD is a safe, high return on investment method of parking your reserve cache of funds. If you happen to invest a sum of Rs. 1 Crore, your 1 Crore FD interest per month will reap high returns.