Which one is better: recurring deposit in bank or SIP in mutual funds?

Posted on Posted in Investing

Today scenario, demonetization of Rs.500/- and Rs.1000/- become a hope lasting for the people in India. In this scenario, people are confused and tried to use their money in different ways. Actually, the money got invested more in banks now. Now it is the opportunity to invest your excess funds which are idle in hands.

Why to Invest?

Money is the asset from which you can build capital assets or spend for your needs and wants. So, if you have funds in hand there is two options

  1. Build capital assets

    It means convert an amount of money as a fixed asset like building, car,gold or investments. Here, the good thing is invest in any capital asset give you an appreciation. It means additional money which the asset earns for you. Investments are safer method, in which earning will be more and anytime you can convert into liquid fund. which is useful for spending.

2. Spend money for needs and wants

We need money for all our needs and wants. Basic needs of food,shelter and clothing. So, for paying rent or monthly installment of home loan or paying for the grocery items, milk, water, electricity or for dress,school fee, internet fee, mobile charges, cable TV, setup box etc. for whatever we need money.

Wants are your interest or likes. Buying a watch, smartphone, car, jewelry, book, luxury product, perfume, bag, laptop which are part of your life and you likes it more and more means it is your wants.

So, why investment is now necessary that also in bank or mutual fund

Investment helps for both the things.

To get a capital asset, you need lumpsum amount which is normally not affordable within your monthly income by way of salary, other income like freelancing, business, service rendering etc.

So savings in small lots every month is required to achieve big lumpsum. Investment not only save  your money, it also give extra income.

For spending your monthly needs, you have no need to spend from your monthly income. Yes, if you invest your 24 months salary in an investment, your monthly expense can be get from the investment itself.

Just try and give your achievements. I will be happy to hear if someone follow this and got additional income.

For example, if a mutual fund gives 10% income per annum on Rs.10 lakhs, then Rs.1 lakh per annum is your return of investment. You can use this for your monthly expenses.

Now, which is better – Fixed deposit or Mutual fund

Invest through search best funds

Features of Recurring Deposit :
  • RD is considered as a safe investment option.
  • Returns from Recurring Deposits are assured and no risk attached.
  • Interest on Recurring Deposit is fully taxable.
Features of Mutual funds :
  • Mutual funds are subject to market risk.
  • Debt mutual funds are considered a safer option than equity funds.
  • In order to enjoy good returns you have to invest your money in Mutual Funds for a longer period and SIP is a good way to do it.
  • You can earn higher returns in Mutual funds as compared to Recurring Deposits but there is always a risk factor involved.
Final words

If you are interested to get return with in a safe and secure way, then fixed deposits are more useful.

If you like to have more return with more risk then mutual fund is better.

Now this decision to be taken based on various factors. It is based on age, your financial position, your financial need etc. Keep following me to know better.

Hope this is useful to you. Give your comments.