What is the disadvantage of FD?
Fixed Deposits (FDs) offer guaranteed returns, but they carry significant financial disadvantages, most notably high liquidity risk and early withdrawal penalties. When funds are locked into a fixed deposit for a predetermined tenure, investors cannot access their capital during financial emergencies without incurring penalty charges or forfeiting accumulated interest. Furthermore, fixed deposits typically fail to provide inflation protection; if the fixed interest rate earned on the deposit falls below the prevailing inflation rate, the purchasing power of the invested principal actually declines over time, resulting in negative real returns for the saver.
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