Among the simplest way to invest, your money is Recurring deposit. Those who do not aim high returns and want lower level of risks, go for RDs. There is decent return in the RD, which acts like a Term deposits in banks. Recurring deposit proves best as it provides the individual the flexibility in terms of amount to be deposited each month. The matter of the fact is that RDs proves best for saving and investment.
How to open a RD?
Opening up a RD account is pretty simple. You simply have to open a RD account with a amountfor a certain time period and every month the same amount would be deposited in your account and you will gain interest on it as well. Every bank provides the option of RD to customers for time period of 6 months to 10 years.
Although banks may provide different interest rate, the interest remains same for the tenure you locked in your RD. Upon maturity, you would be given the whole amount (Principle +Interest).You can calculate your RD easily with the RD calculator here: https://www.upwardly.in/recurring-deposit-calculator
For beginners, RD proves to be a great tool for investment asit carries minimum risk and decent returns.
Short term returns with RD
Recurring Deposits offers guaranteed returns on your monthly investment done. For short time period, mutual fundsare not ideally preferred. Also, there is neither any guarantee of returns in Mutual Funds and shares invested in. The good amount of returns can only be expected in long run. Therefore, RDs are meant to be ideal when planning investment for 1-3 years. One can expect returns from 7-10%, which also depend upon the time period chosen by the investor.
Ultra Short term Returns with RD
Individuals have ultra short-term goals in life more than the long-term goals. Planning a vacation, Marriage in family, Children fees etc are such small goals. Let us take an example. You wish to go on a vacation after 8 months. The expense for the same comes out to be around Rs 80,000. So for the same either you can manage the cash at the end time or can plan well before. Simply opening an Rd account with Rs 10,000 for next 8 month would leave you to be worry free when you have to actually go for vacation. This will ensure your holidays with smart returns and would not push it further due to cash crunch.
Additional features of RD
- You can avail Loans against RD for amount summing to 80-90% of RD.
- RDs can be broken at any point of time and interest will be calculated for the running period and not tenure decided.
- Flexi RDs are also provided by some banks wherein you can increase the RD amount monthly but yes cannot decrease to the fixed amount stated.
- The interest earned is fully taxable but you cannot avail the TDS. Interest is calculated on Quarterly basis and is compounded.
Thus, with recurring deposits you can maximise your investment returns and can also minimize the time period of investment.