{"id":5935,"date":"2023-10-11T12:46:13","date_gmt":"2023-10-11T12:46:13","guid":{"rendered":"https:\/\/lxme.in\/?p=5935"},"modified":"2024-11-05T04:00:21","modified_gmt":"2024-11-05T04:00:21","slug":"is-fd-risk-free","status":"publish","type":"post","link":"https:\/\/lxme.in\/v1\/is-fd-risk-free\/","title":{"rendered":"Is FD risk free?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_75 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#Introduction\" >Introduction:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#What_is_a_Fixed_Deposit\" >What is a Fixed Deposit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#Why_Do_Women_Choose_FDs\" >Why Do Women Choose FDs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#Is_FD_Risk_Free\" >Is FD Risk Free?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#How_to_Minimize_FD_Risks\" >How to Minimize FD Risks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#Conclusion\" >Conclusion:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#1_Is_there_any_risk_in_a_fixed_deposit\" >1. Is there any risk in a fixed deposit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#2_How_much_coverage_does_DICGC_provide_per_depositor_per_bank\" >2. How much coverage does DICGC provide per depositor, per bank?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/#3_Are_FD_interest_rates_the_same_for_all_banks\" >3. Are FD interest rates the same for all banks?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span><strong>Introduction:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When it comes to investing your hard-earned money, one of the options that often comes to mind is Fixed Deposits, commonly referred to as FDs. FDs have been a go-to choice for women for decades, mainly due to their perceived safety. But<strong> is FD risk free?&nbsp;<\/strong><\/p>\n\n\n\n<p>In this blog, we&#8217;ll break down the concept of FDs in simple terms and understand the risks associated with FDs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Fixed_Deposit\"><\/span><strong>What is a Fixed Deposit?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Fixed Deposit is a <strong>financial instrument<\/strong> provided by banks and other financial institutions where you deposit <strong>a lump sum of money<\/strong> for a predetermined period and <strong>earn a fixed rate of interest<\/strong>.<\/p>\n\n\n\n<p>For example &#8211; If you invest \u20b9100,000 in a fixed deposit for 1 year at a 5% annual interest rate, then you will receive \u20b95,000 as interest at the end of the year along with \u20b91,00,000 that you invested.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Do_Women_Choose_FDs\"><\/span><strong>Why Do Women Choose FDs?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Safety of fixed deposits<\/strong><strong>:<\/strong> FDs are <strong>often considered safe<\/strong> because they are backed by banks or financial institutions. When you deposit your money in an FD, you essentially lend it to the bank, which promises to pay you back with interest at the end of the tenure.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Guaranteed returns in fixed deposits:<\/strong> FDs offer guaranteed fixed returns. The interest rate is <strong>fixed at the time of investment<\/strong>, so you know exactly how much you&#8217;ll earn at the end of the tenure.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_FD_Risk_Free\"><\/span><strong>Is FD Risk Free?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Now, let&#8217;s address the burning question: Are FDs risk-free? The short answer is no: FDs are not entirely risk-free.&nbsp;<\/p>\n\n\n\n<p>While they are considered safer than many other investment options,<strong> there are still some risks<\/strong> to be aware of.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Interest Rate Risk:<\/strong> FD interest rates are fixed at the time of investment. This means that if interest rates in the market rise after you&#8217;ve invested in an FD, you&#8217;ll miss out on the opportunity to earn higher returns.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Inflation Risk:<\/strong> Inflation means an increase in the prices of goods and services. If the rate of inflation is higher than the interest rate you&#8217;re earning on your FD, you may experience a decrease in the actual value.&nbsp;<br>For example &#8211; If the current inflation rate is 6%p.a and you have invested in a FD that gives 7% p.a, then the real returns earned are just 1%.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Default Risk:<\/strong> The risk of a bank default is uncommon but exists. In the event of a bank default, deposits, including interest, of up to \u20b9 5 lakh per individual per bank account are protected and assured by the DICGC. However, any amount exceeding this Rs 5 lakh limit is at risk of loss in case of a default.<br><br><strong>Now, let\u2019s understand what is DICGC and the role it plays:&nbsp;<\/strong><br>DICGC stands for Deposit Insurance and Credit Guarantee Corporation, and it plays an important role in safeguarding your deposits. DICGC is a subsidiary of the Reserve Bank of India and provides insurance coverage on deposits in Indian banks.<br><br>DICGC insurance covers each depositor&#8217;s deposits up to a maximum limit of \u20b95 lakhs per bank, including both principal and interest amounts. This means that if a bank holding your FD faces financial difficulties or defaults on payments, you are protected up to \u20b95 lakhs through DICGC insurance.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Liquidity Risk<\/strong>: Withdrawing your money prematurely can result in a penalty and a lower interest rate. So, if you suddenly need access to your funds, you might not get the full benefits of your FD.&nbsp;<br>For example &#8211; If you have a 5 year FD, and you need funds after 2 years, you may face penalties or reduced interest rates, leading to lower returns than expected.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Taxation Risk:<\/strong> The interest earned on FDs is subject to income tax. Depending on your tax bracket and the prevailing tax laws, you may have to pay a significant portion of your earnings in taxes, reducing your overall returns.<br>For example &#8211; If you are in the 30% tax bracket and invest in a 6% p.a FD, the real return you will get after taxes is 4.2%, and this could be much lower if we consider inflation.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Minimize_FD_Risks\"><\/span><strong>How to Minimize FD Risks?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><a href=\"https:\/\/lxme.in\/what-is-asset-allocation-guide\/\" target=\"_blank\" rel=\"noreferrer noopener\">Diversify<\/a> Your Investments:<\/strong> Don&#8217;t put all your money into<strong> <\/strong>one investment option. Instead, <strong>consider spreading your money across various asset classes<\/strong>, such as equity, debt, and gold. Diversification can help balance risks and potentially yield higher returns.<\/p>\n\n\n\n<p>Mutual funds provide a great start for women, as it offers the benefit of diversification and also you get the benefit of professional fund management at a very low cost plus and&nbsp; you can start with as low as \u20b9100. Check out the various goal- based portfolios offered on the LXME app. These are well-researched, diversified and curated by experts.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In conclusion, although Fixed Deposits are often seen as a secure choice among women,<strong> they are not entirely free of risks<\/strong> and will not help you beat inflation. Like any investment, FDs come with their own set of risks. Therefore, it\u2019s important to diversify your money in different instruments to achieve your goals.The key to successful financial planning is finding the<strong> right balance between risk and reward<\/strong>.&nbsp;<\/p>\n\n\n\n<p><strong>Share this blog with your family and friends if you find it insightful!!<\/strong><\/p>\n\n\n\n<p><strong>Download the<a href=\"https:\/\/lxme.onelink.me\/95JV\/lxmewebsite\" target=\"_blank\" rel=\"noreferrer noopener\"> LXME<\/a> app for more such content!<\/strong><\/p>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1697027779455\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"1_Is_there_any_risk_in_a_fixed_deposit\"><\/span><strong>1. Is there any risk in a fixed deposit?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p><strong>Ans. <\/strong>Yes, Like any investment, FDs come with their own set of risks, including interest rate risk, inflation risk, default risk, liquidity risk, and taxation risk.\u00a0<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1697027806494\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"2_How_much_coverage_does_DICGC_provide_per_depositor_per_bank\"><\/span><strong>2. How much coverage does DICGC provide per depositor, per bank?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p><strong>Ans.<\/strong> DICGC guarantees coverage of up to Rs 5 lakh per depositor, per bank and covers both the principal and interest amount of the deposit.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1697027816973\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"3_Are_FD_interest_rates_the_same_for_all_banks\"><\/span><strong>3. Are FD interest rates the same for all banks?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p><strong>Ans. <\/strong>No, FD interest rates vary from bank to bank and can also depend on the tenure of the FD. Different banks offer different rates, so it&#8217;s a good idea to compare rates before opening an FD to get the best deal.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n<p><br>&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction: When it comes to investing your hard-earned money, one of the options that often comes to mind is Fixed Deposits, commonly referred to as FDs. FDs have been a go-to choice for women for decades, mainly due to their perceived safety. But is FD risk free?&nbsp; In this blog, we&#8217;ll break down the concept <a href=\"https:\/\/lxme.in\/v1\/is-fd-risk-free\/\" class=\"more-link\">&#8230;<span class=\"screen-reader-text\">  Is FD risk free?<\/span><\/a><\/p>\n","protected":false},"author":10,"featured_media":5936,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[655,650],"tags":[198,440,30,438,439,137],"class_list":["post-5935","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-saving","category-tax","tag-financial-plan","tag-guaranteed-returns-in-fixed-deposits","tag-investing","tag-is-fd-risk-free","tag-safety-of-fixed-deposits","tag-women-and-money"],"acf":[],"_links":{"self":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts\/5935","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/comments?post=5935"}],"version-history":[{"count":2,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts\/5935\/revisions"}],"predecessor-version":[{"id":6067,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts\/5935\/revisions\/6067"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/media\/5936"}],"wp:attachment":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/media?parent=5935"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/categories?post=5935"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/tags?post=5935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}