Fixed income instruments are financial instruments that offer assured returns along with capital protection. They are latent to market volatility and offer a fixed rate of interest throughout the investment period. 

If you have a moderate or low-risk appetite, you can opt for a fixed income instrument to build your financial corpus for different life goals. Here are the various fixed income avenues that you can contemplate investing in and make a part of your portfolio.

Fixed Deposit
A fixed deposit (FD) is a popular fixed income financial instrument in India. It’s a relatively simple product and one of the most common offerings from financial institutions such as banks, post offices, and non-banking financial companies (NBFCs). Here you deposit a lump sum on which you get a fixed rate of return throughout the investment period (tenure).

In an FD, you lend a certain sum of money to the financial institution upon which you earn interest. On opening an FD, you get a certificate of deposit that mentions the principal amount, rate of interest, investment tenure, and maturity amount. Upon maturity, you get the principal amount along with the interest earned.      

Different Types of FDs
There are two types of FDs on offer – regular and tax-saving.

Regular FD
The investment tenure can range from a week to up to 10 years.
You can liquidate a regular FD before maturity. If you do so, you need to pay a penalty.

Tax-saving FD
The investment tenure is up to five years. As the name suggests, investment in a tax-saving FD qualifies for tax deduction under Section 80C of the Income Tax Act, 1961.
You can’t break a tax-saving FD before maturity. The proceeds are payable only upon completion of the term period, i.e., five years. If you are a senior citizen, the rate of interest of your FD is slightly higher than what’s on offer otherwise.

Advantages of an FD
Easy to Understand
FD is a relatively simple product. There are no complexities involved. You deposit lump sum money on which you earn interest. Also, the rate of interest, even if revised midway, remains the same. In other words, your FD will earn the same interest rate that prevailed at the time of booking even if the financial institution lowers it midway.

Loan Facility
This loan facility is another major benefit of FDs. You can pledge your FD as collateral for obtaining a loan. Though the amount varies across lenders, generally, you can avail 80% to 90% of the FD amount as a loan. So, in case you require money for any purpose, you can pledge your FD as security and obtain the desired loan.

Flexible Tenure
As said, the tenure of a regular FD ranges from a week to up to 10 years. You can select the investment tenure as per your requirement. 

Ideal Avenue to Park Money For Emergencies
An FD is an ideal avenue to park money for emergencies. As you can access it easily in times of need, it’s a good option to save up for a contingency. You can deposit money equivalent to six months or a year’s expense in a regular FD.

Public Provident Fund
Public Provident Fund or PPF is another popular fixed return instrument that you can invest in to build a corpus for goals such as children’s higher education, marriage, and retirement. A Government of India (GoI) backed scheme, PPF has a lock-in period of 15 years. 

It means you can withdraw the entire amount only after the completion of 15 years, though partial withdrawals are permitted subject to certain conditions. Also, note that if you wish, you can extend the period by five years more after the completion of 15 years.