Your parents and grandparents swore by bank deposits. Unfortunately, in the era of interest rates dipping, this avenue has lost some of its lustre.

What is great about this is the tenure of investment. It could be as low as 15 days and go as high as 10 years. The interest given is determined by the tenure. Most often, the longer the tenure, higher the rate of return.

Fixed deposits are not solely available with the bank. You can even get them in a post office.

Companies too offer fixed deposits

Though the interest rates offered are a little higher than banks and the post office, they are more risky.

Rating agencies like CARE, CRISIL and ICRA rate these deposits. An AAA rating signifies highest safety (with regard to getting your interest and principal amount return), and D or FD means the company could default (not pay the interest and not return the money). The issuers have to state their rating when they come out with the deposit.

The tenure and minimum investment will vary from company to company. Normally, the minimum investment is Rs 5,000 and the deposits could extend from six months to five years.

In a fixed deposit, you put in a fixed amount at one go. In a recurring deposit, you have to keep putting in fixed amounts every month.

Banks,Post Office and Company Fixed Deposits offer this. This is great if you do not have money to invest at one go and also if you want to get disciplined in your investments.

If you manage to save just small amounts every month, this is an excellent option.

If your deposit is with the bank, you can ask them to directly debit a fixed amount from your savings account every month.

However, not all banks offer this option. Those that do stick to a long tenure of around five years. Each bank will offer their own rate of interest.

RBI bonds are similar in that they offer 8% on your investment. You money will be locked in for six years.

Interest is payable half yearly or given at one go at the end of the tenure. RBI Bonds do not offer any tax benefit.