When you invest in an FD, you want your capital to grow faster than a savings account.

However, investors often miss out on earning higher fixed deposit interest rates due to a lack of awareness. This article helps you discover the top-5 things you should do to get better rates and watch your capital grow quickly. 

The Top-5 Tips to Maximise the Returns From Fixed Deposits

Frame a Proper Investment Strategy

Knowing your investment goals and framing the horizon is more important than investing in an FD or knowing its status. Most modern-day financial institutions offer the facility of auto-renewal. If you want your capital to grow and get the best fixed deposit interest rates, consider opting for auto-renewal of your fixed deposit. Many financial institutions also offer a 0.25% to 0.50% extra interest rate to investors renewing their FD accounts.

Invest in Corporate Fixed Deposits

Corporate fixed deposits from housing finance companies, like PNB Housing, offer higher interest rates than conventional financial institutions. However, before investing in a corporate FD, check it’s status and credit rating, as not all corporate houses offer the same kind of safety and commitment. Usually, a credit rating of FAA+ by CRISIL or AA by CARE is regarded as the benchmark. Hence, by investing in a stable fixed deposit, you can not only get higher returns but also your capital stays one hundred per cent safe.

Divide Your Capital 

Usually, people invest their capital in one fixed deposit. Often, this approach is good, as you earn interest on the entire amount. However, sometimes, you may need cash for fulfilling a sudden financial goal and may need to withdraw the amount by breaking the FD. When you break an FD, it changes the FD status, and the financial institution charges a penalty. As a consequence, the effective returns on investment becomes less. Hence, if you want to get the highest fixed deposit interest rates, consider diving your capital into multiple fixed deposits of varying durations. Dividing your capital ensures optimal liquidity and, at the same time, capital appreciation.

Select The Best Financial Institution

Selecting the best financial institution might seem easy, but it is not that simple. Often, companies with a poor track record or financial history offer exorbitant interest rates to lure investors. As an investor, nothing can be more devastating than to fall in the trap. Hence, before investing in a corporate FD for higher returns, check its financial track record and FD status. For instance, PNB Housing has a stable track record of over thirty years and offers CRISIL FAA+ or FAA+ Negative and CARE AA-rated FDs with a yield to maturity of up to 9.13%.

Choose a Long-Term Fixed Deposit

An excellent way to get high fixed deposit interest rates is by opting for a long term cumulative FD. Fixed deposits are of two types – cumulative and non-cumulative. Investors choose non-cumulative FDs to receive interest payment periodically. However, the interest rate offered is slightly lower than a cumulative FD. Hence, if you want to get the best interest rates, choose a cumulative FD and stay invested for the maximum term.

Conclusion

The returns from an FD depends on multiple factors, which includes FD status, term, the financial institution’s reputation, and the investor’s investment objectives. Ensure that you compare the rates offered by various companies and select the best one.