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Fixed deposits still useful as a source of liquidity
IN the past two months or so, fixed deposit (FD) rates have trended downwards following the US Federal Reserve's rate movements.
The initial reaction of those with FD accounts might then be to consider higher-yielding instruments such as stocks which come with higher risk.
If you are indeed moving your money out, think about how to put it to use by further diversifying your financial portfolio. This should be composed of assets stretching from bonds, to dividend-paying stocks and endowment plans.
Diversification helps you earn income from a variety of sources, as well as diversify risk. Ultimately, one should not depend solely on a singular security or product. This also ensures that one's portfolio is not too adversely impacted by any unforeseen events in financial markets.
Having said that, there is still a role for fixed deposits in one's portfolio. They are still useful as a source of liquidity and generally yield better returns than a regular savings account.