Want to earn high returns? FD Laddering is your way to earn good returns at lower risk!

Published on: Sat Apr 22 2023

Want to earn high returns? FD Laddering is your way to earn good returns at lower risk!

Fixed Deposits (FDs) are one of the most popular investment options in India due to their guaranteed returns, low risk, and high liquidity. However, investing all your money in a single FD can be risky, as it exposes you to interest rate fluctuations and liquidity constraints. This is where FD laddering comes in as a smart investment strategy that can help you earn higher returns and mitigate risks.

What is FD Laddering?

FD laddering is a simple investment strategy that involves dividing your investment into multiple FDs with different maturity periods in a staggered manner. Instead of investing all your money in a single FD, you can invest it in multiple FDs with varying maturity periods. This helps you earn higher returns while providing liquidity as the FDs mature at different intervals.

For example, let's assume you have Rs. 1 lakh to invest. Instead of investing it in a single FD for one year, you can divide it into four FDs of Rs. 25,000 each with maturity periods of 3 months, 6 months, 9 months, and 12 months respectively. As each FD matures, you can reinvest the principal amount in a new FD with a longer maturity period.

How Does FD Laddering Work ?

In India, FD laddering is a popular investment strategy among risk-averse investors who want to earn higher returns on their savings. Here's how it works in India:

Step 1: Choose the FD Tenure

The first step is to choose the FD tenure. You can choose the FD tenure based on your financial goals, risk appetite, and liquidity requirements. For example, if you want to earn higher returns, you can opt for a longer FD tenure. On the other hand, if you want liquidity, you can opt for a shorter FD tenure.

Step 2: Divide Your Investment

Once you have chosen the FD tenure, the next step is to divide your investment into multiple FDs with varying maturity periods. You can divide your investment equally or unequally depending on your financial goals.

Step 3: Reinvest the Principal Amount

As each FD matures, you can reinvest the principal amount in a new FD with a longer maturity period. This helps you earn higher returns while providing liquidity as the FDs mature at different intervals.

Benefits of FD Laddering

FD laddering offers several benefits, including:

Higher Returns: FD laddering helps you earn higher returns as you invest in FDs with varying maturity periods. This helps you take advantage of the interest rate fluctuations and earn higher returns.

Liquidity: FD laddering provides liquidity as the FDs mature at different intervals. This helps you access your money when you need it without incurring any penalties.

Mitigates Risks: FD laddering helps you mitigate risks by reducing the impact of interest rate fluctuations and inflation. It also helps you avoid liquidity constraints as the FDs mature at different intervals.

Easy to Manage: FD laddering is easy to manage as it involves investing in FDs with varying maturity periods. This helps you keep track of your investments and plan your financial goals effectively.

Conclusion

FD laddering is a simple and effective investment strategy that can help you earn higher returns and mitigate risks. By dividing your investment into multiple FDs with varying maturity periods, you can take advantage of the interest rate fluctuations and earn higher returns. FD laddering also provides liquidity and helps you avoid liquidity constraints. Therefore, if you are a risk-averse investor looking for a safe and effective investment strategy, FD laddering is the perfect option for you.

Returns are subject to market risk.

Past performance do not assure future returns.

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