Fixed Deposit is a kind of Term Deposit with higher interest rate (as compared to regular savings account) and because of high interest rate and low risk, it's quite a popular investment choice in India. The interest rate is fixed for the whole maturity period and, it's usually considered as an extremely safe investment.
You also need to pay taxes on the interest earned during a financial year, depending on your tax bracket. For long term need, you could also look for some alternatives like PPF (very safe and it has tax benefit as well) and SIP (investing in equity asset is risky but it has potential to generate higher returns in long term).
| Pros | Cons |
|---|---|
| FD is very safe | FD has low liquidity (you'll earn less interest in case of premature withdrawal) |
| Stable and predicted returns (e.g 7% p.a) | Low returns, when you take inflation in account, actual returns are lower. It will further reduced because of taxes (especially if you're in 30% tax brackets) |
| Well suitable for conservative investors | Not suitable for long term wealth creation or the investors with high risk appetite (e.g young investors in their 20s or 30s) |