With Fixed Deposit, you have sufficient liquidity available over a specified time period. There are many other benefits also.
Fixed deposit is considered the most convenient investment option, especially when you are in the income tax slab. It works better for low risk individuals for low risk products. Apart from credit risk, there is a risk of liquidity risk and reinvestment. If you make a fixed deposit in big names in India Post, National Banks and Private Sector, then the risk is negligible. However, an investor cannot ignore the needs of liquidity. You can address with landing. This means that we put our fixed deposits in the timeline.
For example, if you have Rs 5 lakh for a fixed deposit, then put them in five fixed deposits for one year, three years and five years, this will help your financial goal. By doing this at regular intervals, you will continue to get FD maturity at regular intervals.
If you need money in between, then you can withdraw money even before FD matures. In this, money can be withdrawn only to the extent required. For example, if you have an FD of five lakh and you want Rs 2 lakh for medical emergency, then for those two lakh rupees, the interest of the entire five lakh rupees of FD will be charged. Apart from this, if there is five FDs of one lakh each, then if you break two, you will get interest of three.
The risk of re-investment of ladding also reduces. This means that when there is a possibility of getting less money at the time of re-investment. If you have invested your entire amount together, you will have to pay FD at low interest. In this, interest is reduced due to lack of interest rates in the economy cycle.
For example, if you have made FD with SBI in 2008 at 10% interest rate and it will be completed next year. This time you can get 6.5 percent interest only if you invest it in SBI again. To avoid this, it is right to invest in different places at different times.