Proper financial planning and decision-making are essential to achieve financial independence and accumulate wealth. With countless investment instruments available, Investors have to find, analyse, and compare the best tools that can deliver the best returns and protection. Fixed deposits and Recurring deposits are two popular instruments that offer significant returns through investment and deliver capital protection. Both investment tools differ in various aspects, making the right selection essential in the long run. Let’s explore the meaning and benefits of both tools to find the best investment medium for every investor:
1. Fixed Deposits:
A fixed deposit serves as a safe investment solution where Investors can deposit their extra income and savings to get significant returns in the long run. Investors are required to make fixed-period deposits with banks, and financial institutions providing them returns on their deposits depending upon the tenure of investment. With interest ranging between 7 to 9%, Investors can receive great returns helping achieve growth and capital appreciation over the long term. Moreover, an FD Calculator can be used to identify the total returns a Fixed deposit can generate making the decision-making process more informed and easier.
Benefits of Fixed deposits:
1. Better returns:
As compared to other forms of investment, fixed deposits can help generate better and more significant returns. With a better percentage, fixed deposits help investors generate compound-based returns on their total investment amount.
2. Lump sum investment:
Investors can opt for lump sum investment in fixed deposits making it easier for investors to generate significant returns. With a large capital outlay, the returns are higher as well compared to other investment avenues.
3. Small as well as large investment outlay:
Investors with small as well as large investment outlays can invest in fixed deposits helping them to get returns irrespective of the amount.
4. Safety:
Fixed deposits are considered one of the safest forms of investment helping investors with a low risk appetite to invest and earn returns.
2. Recurring deposits:
Recurring Deposits, unlike fixed deposits, involve small regular investments of a fixed amount every month for earning returns. Depositors receive returns on their recurring deposits which get accumulated over a period say 3 – 5 years. Investors can use the RD Calculator to identify the monthly investment amount along with the total returns it can generate to get a complete overview of the RD deposits and its return-generating capability.
Benefits:
1. Consistent deposits:
Investors can understand the importance of savings. With regular savings and consistent deposits, Investors can generate significant returns.
2. Guaranteed returns:
Investors even receive guaranteed returns like FD making it a preferred option for risk-averse investors.
3. Low investment requirement:
Investors can start investing in the Recurring Deposit scheme with a small amount as well that is deposited every month.
Conclusion:
Fixed deposits offer better returns as compared to recurring deposits. However, recurring deposits do not require large lump-sum investments. The choice between the two investment tools depends on the financial goals and preferences of the investors. Individuals with better disposable income for investment and are willing to invest it for a long period for returns must opt for fixed deposits. On the other hand, salaried individuals who cannot invest in a lump sum but wish for similar returns with safety can go for a recurring deposit scheme.
