Funds and money reserves should be parked properly to ensure safety and good returns on your investment. Nowadays several financial instruments are available to help you put your money into a secure yet lucrative investment. Besides, there are various methods and tools to find out about the best returns on various modes of investment. One such tool is the RD calculator which is commonly used to calculate the return on your deposit along with the total corpus at the time of maturity of the recurring deposit.
Let us do a comparative analysis to check the returns and other factors affecting your decision to invest in a recurring or fixed deposit scheme:
- Definition of deposit: Looking at the very definition of the two deposits, a lump sum amount of funds invested for a fixed tenure comprises a fixed deposit. On the contrary, a systematic fixed investment plan to deposit a pre-decided amount every month comprises a recurring deposit. In both cases, the period of the deposit is pre-determined.
- Interest rates: The interest rate for fixed deposits is usually higher than that of a recurring deposit scheme. It is because of a commitment of a lump sum amount at the beginning of the period.
- Tenure: The tenure of investment for both fixed deposit and recurring one varies from six months to ten years. it depends on the policies of the financial institution, here banks, and the preference of a customer.
- Investment flexibility: In the case of a deposit through a recurring scheme, there is flexibility to put in a pre-decided amount every month. However, in the case of an FD deposit, the customer has to pay upfront the total amount to be deposited.
- Premature withdrawal: Withdrawals before the maturity of the deposited amount are allowed in both cases, but invite a penalty due to a change in the investment amount. This change is adjusted in the final maturity amount at the end of the tenure of the deposit.
- Maturity amount: The amount at the time of maturity is higher in the case of a fixed deposit due to a higher rate of interest on the lump sum amount of the deposit.
- Tax implications: The deposits under both schemes are taxable and a TDS is deducted by the bank before transferring the maturity amount into your account.
- Suitability: Eventually, it is the customer’s preference based on his needs and funds available to him that he can choose the deposit scheme and park his money. While most people look for a higher return, the availability of funds surely is the deciding factor for choosing the scheme of deposit.
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When it comes to parking your money safely and ensuring the best possible returns on it, there is always a conflict in the mind of the common man. It is because depositing money in a fixed deposit has technically been a more convincing method which uses an FD calculator tool and has been passed on through the centuries. However, deposits in a recurring scheme are equally rewarding, if not more. So, select your preference of deposit type based on your financial goals, liquidity needs and availability of funds. Then relax while your money grows on its own.