Whenever safe investments are discussed, the first thing that comes to mind is a bank Fixed Deposit (FD). The reason is clear – FDs have low risk and offer a predetermined return. However, when the amount is large, such as ₹10 lakh, people often get confused about whether to create a single FD for the entire amount or invest in multiple FDs. The right decision depends on your needs, liquidity requirements, and security concerns. Let's understand what a smart approach to investing ₹10 lakh in FDs could be.

Two Ways to Invest ₹10 Lakh in FDs

If you have ₹10 lakh, you have two main options for investment:

Option 1: A single FD of ₹10 lakh

In this option, you invest the entire amount in a single FD for a fixed period and at a fixed interest rate.

Option 2: Investing in multiple FDs
In this option, you divide the amount into smaller parts, such as 5 FDs of ₹2 lakh each or separate FDs of ₹5 lakh, ₹3 lakh, and ₹2 lakh.

Investing in a Single FD: Advantages and Disadvantages
Advantages
Easy to manage.
Only one maturity date to remember.
No hassle with interest calculations.

Disadvantages
If you suddenly need ₹2-3 lakh, you will have to break the entire FD.
Breaking the FD prematurely results in penalties and lower interest.
Liquidity is reduced.

Investing in Multiple FDs: Advantages and Disadvantages

Advantages
If needed, you can break only the required number of FDs.
The remaining FDs remain secure and continue to earn interest.
Having different maturity dates ensures a regular flow of money.
If not needed, matured FDs can be reinvested.

Disadvantages
Tracking and managing multiple FDs can be slightly difficult.
You have to remember different interest rates and maturity dates.
What Smart Investors Do
Most smart investors adopt the FD Laddering Strategy. In this method, they divide the amount into different FDs, investing in different tenures and banks. This maintains liquidity, reduces risk, and makes the money easily accessible when needed.

Why are FDs in different banks more secure?
According to the rules of the DICGC (Deposit Insurance and Credit Guarantee Corporation), only deposits up to ₹5 lakh in a single bank are covered by insurance. This means that if you have a ₹10 lakh FD in one bank, only ₹5 lakh of that amount is insured. However, if you open FDs in different banks, the amount up to ₹5 lakh in each bank is secure.

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