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Fd Laddering: FD Laddering is a special method of investment, in which instead of investing your entire amount in a single FD of tenure, you divide it into FDs of different tenures. With this strategy, one of your FDs will mature from time to time.
If you want better returns on your savings, then FD Laddering Strategy can prove to be a great option for you.
FD laddering is an ideal option for investors who want both better returns and liquidity without compromising on safety.
Usually, people invest the entire amount in a single FD, due to which the FD has to be broken if needed and there is loss of interest. Whereas in laddering strategy, investors divide their total amount into FDs of different periods like 1 year, 2 years, 3 years and 5 years.
In this facility, only that amount is withdrawn which is necessary. The remaining amount remains in the FD and normal interest continues to be received on it.
For example, if you have Rs 5 lakh, instead of investing it in a 5 year FD, you divide it into five parts of Rs 1 lakh each and invest them in 1 year, 2 years, 3 years, 4 years and 5 years FDs respectively. With this strategy, your FD will mature every year, due to which money will be available to you regularly.
Liquidity is maintained through laddering strategy. In case of need, only one FD has to be broken, not the entire amount.
This strategy gives average benefit from interest rates. The effect of fluctuations in interest rates on FDs of different tenures remains the same.
You can change the investment period as per your need and the risk is also reduced by dividing the funds.
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