Fixed deposit accounts are reliable investment options that help investors grow their wealth steadily and at a fixed, high interest rate. IndusInd Bank, for instance, offers a high-interest interest rate of 7.5% to customers through its fixed deposit accounts. investors often opt for the “laddering strategy” to make the most of their FD investments and maximise their returns. Creating an FD ladder can help an investor benefit from higher liquidity and higher interest rates in the future.
What is a fixed deposit laddering strategy?
Understanding fixed deposit laddering can help investors maximise their FD returns over time. Fixed Deposit laddering is an investment strategy where the investor creates an “FD ladder” by investing in multiple FDs with different tenures and interest rates; thereby creating a “ladder” of FD maturity dates. Suppose an investor has an investment corpus of ₹3 lakh and wishes to adopt the FD laddering strategy to grow their wealth in the long run. They invest their corpus in the following way:
| Principal amount | Tenure (in years) | Interest rate (in %) |
| ₹ 1 lakh | 1 | 7.1 |
| ₹ 1 lakh | 2 | 7.3 |
| ₹ 1 lakh | 3 | 7.5 |
As the next step, the investor must re-invest the returns earned from these FDs at the end of their respective tenures. The investor in this example can therefore choose to re-invest the returns from these FDs for a fixed tenure; for example, three years. When the second FD matures a year later, the investor will re-invest the returns from that FD in another FD with a three-year-long tenure, and so on. Doing this creates a ladder of FD maturity dates, thereby helping the investor earn returns from their FDs at different dates.
What are the benefits of adopting an FD ladder strategy?
Adopting an FD ladder strategy can help investors grow their wealth significantly. Here are the key benefits of adopting this strategy while investing:
FD laddering can help investors benefit from higher interest rates:
The FD laddering strategy has the potential to help an investor earn higher rates of interest than a regular savings account or a single FD. Banks like IndusInd Bank already offer high interest rates through their FDs; and customers can avail higher rates of interest by adopting this strategy and re-investing their FD’s returns.
An FD ladder helps investors access their funds more frequently:
A key advantage of FD laddering is the ability to access one’s funds more easily. FD laddering offers more liquidity to a customer than a regular FD account and helps them access their funds more frequently.
FD laddering helps investors diversify:
Investors can reduce the overall risk of their investment portfolio by implementing the FD laddering strategy to grow their wealth. In this way, investors can minimise the risk of lowering their returns in case interest rates fluctuate.
Investors can achieve their long-term financial goals through FD laddering:
FD laddering is a very efficient form of long-term investing since it guarantees returns, is low on risk, and offers higher returns in the long run.
Before choosing to implement the FD laddering strategy, investors must consider a few other points such as their liquidity requirements, the fluctuation of interest rates, and tax implications. Investors must also clearly define their financial goals before adopting an FD laddering strategy. Using a fixed deposit ladder calculator can help them calculate their returns in advance and plan their FD ladder strategy well. Visit the IndusInd Bank website to check out FD tenures and get started with this strategy to grow your money today.
