2. Credit profile

Fixed deposits carry credit profiles which is an indicator of the degree of risk connected with it in terms of timely repayment of the principal and interest payment. For example, an 'AAA/FAAA' rating is indicative of the highest level of safety. Typically, an FD with a higher rating would offer lower returns vice-versa an FD with a lower rating.

The additional return in a lower rated FD is in result a compensation for the higher risk borne. Investors would do well to decide on the quantum of risk they are willing to bear and then select an FD.

3. Interest payout options

Investors can generally choose between various interest payout options like monthly, quarterly, annually or on maturity. Ideally, the investor's need for liquidity should be used to determine which interest payout option is chosen.

Selecting the interest payout 'on maturity' option can help investors benefit from the compounding effect and get a higher return.