FD Tips: Are your future savings solely dependent on fixed deposits? Relying too much on them could prove costly..

In the past, older generations mostly invested their savings in Fixed Deposits (FDs), earning a fixed interest rate and watching their money grow gradually. However, there's a huge difference between then and now. Back then, there weren't as many investment options as there are today, nor were the lifestyle, expenses, and inflation the same. Therefore, if you've made Fixed Deposits your financial backbone today, this decision could prove costly. This is why most financial advisors today recommend diversification in your portfolio. Let's understand this further.

Why FD seems like the safest investment

The biggest strength of an FD is its safety. It is not affected by market fluctuations. Senior citizens get extra interest, and the money can be easily withdrawn when needed. This is why people feel secure putting their savings in FDs. They are confident that their money is safe and will earn a fixed interest rate over time.

FD returns are weak against inflation!
It's not that including FDs in your portfolio is a mistake, but relying solely on FDs can be. The reason is that FDs don't have the capacity to beat inflation. The average return on an FD is around 6 to 7 percent. While inflation often reaches 6 percent or more. In such a scenario, after tax deductions, the real return on an FD is almost zero. This means that the money appears to be growing, but its purchasing power is decreasing.

What happens if you invest all your money only in FDs?
If all your savings are in FDs, you are missing out on growth opportunities. Higher returns are necessary for long-term goals like children's education, buying a house, or retirement. FDs cannot fulfill this need. This is why experts say that relying on only one asset class is not wise.

What is diversification, and why is it important?
Diversification means distributing your savings across different investment options. Such as FDs, mutual funds, PPF, NPS, and a portion in gold. When money is invested in different places, the loss in one area is balanced by the gain in another. This reduces risk and increases the likelihood of better returns.

Which investment options can be combined with FDs?
Mutual Funds: For better returns in the long term.
PPF: For tax savings and safe returns.
NPS: For retirement planning.
Gold: For protection during times of inflation and uncertainty.
It's not necessary to completely abandon FDs, but relying solely on them can be risky.

Investment strategy according to age:
20–35 years: Less in FDs, more in equity and mutual funds.
35–50 years: A balance of FDs, mutual funds, and PPF.
50+ years: Increase the proportion in FDs and safer options, but don't keep all your savings there.

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