One of the main reasons why everyone keeps asking you to not only save, but to make inflation-beating savings is because of inflation. Inflation, or a rise in the price of some valuable or essential products, is on our central bank's radar because too much of it makes life, practically, more expensive for everyone.
As an investor, you must keep this in mind when making investment decisions. But there's something we should all think about first.
In the near future - The most important issue in the short term is the protection and security of your savings. Much more than the effects of inflation. When it comes to a cycle of less than three years, whether or not the investment beats inflation is a moot point.
Only for a long period of time, such as three years or more, does inflation have a noticeable effect on money's buying power.
Is it possible to beat inflation with a fixed deposit rate of interest?
The question, "What is inflation?" might be ringing in your head. That is the gradual increase in the price of goods and services over time. In a year's time, the value of a hundred rupees would have changed. As a result, it's important to account for inflation when estimating returns, i.e. the difference between your estimated returns and the actual returns. This is how money's buying power is described.
Furthermore, the interest rates offered by banks on FDs are rarely higher than inflation. As the income from FDs is taxed, the value of the money will decrease due to inflation. To take advantage of this, the safest solution will be to invest in FDs for the short term. Inflation would not be as successful for depositors in the lower tax bracket. FDs, on the other hand, do not seem to be a safe choice for depositors in the higher tax bracket.
The interest rate on a fixed deposit is important since it determines the returns you will get when you open an account. It is therefore critical to determine which bank offers the best fixed deposit interest rate, which will necessitate some analysis. There are several online resources that can assist you in determining the latest rate of interest on a fixed deposit, allowing you to make an informed decision.
Equity investing is a popular choice because it can yield higher returns, but it is also the riskiest. FDs, on the other hand, are a more reliable yet safer alternative.