What is Fixed Deposit (FD)?

A Fixed Deposit (FD) is a savings instrument offered by banks where you deposit a lump sum amount for a fixed period at a fixed interest rate.

Unlike SIP or mutual funds, FD offers guaranteed returns.

How Fixed Deposit Works

• You deposit a fixed amount (example: ₹50,000)
• You choose a tenure (6 months, 1 year, 5 years, etc.)
• Bank pays fixed interest
• You receive principal + interest at maturity

Example of FD

If you invest ₹50,000 at 6% annual interest for 1 year:

You earn ₹3,000 interest.

Total maturity amount = ₹53,000

Benefits of Fixed Deposit

• Guaranteed returns
• Low risk
• Suitable for conservative investors
• Good for short-term goals

FD vs SIP

• FD gives fixed return
• SIP returns depend on market
• FD is low risk
• SIP can give higher long-term returns

Learn more about What is SIP.

FD and Compound Interest

Some FDs use compound interest, where interest is calculated on principal + previous interest.

Learn how compound interest works.

Final Thoughts

Fixed Deposit is safe and predictable.

If you want stability, FD is suitable. If you want growth, SIP may be better.

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