All you need to know about RD and FD

NEW DELHI: When considering investments, it is important to have a balanced portfolio that takes into account the individual's financial goals, risk tolerance, and investment time horizon. While popular investment instruments like fixed deposits (FDs) and recurring deposits (RDs) offer safety of capital and guaranteed returns, they may not necessarily provide inflation-beating returns in all market conditions.

Someone who wants to secure their capital investment in an investment instrument and whose primary goal is to earn a guaranteed return can choose between recurring deposits and fixed deposits. It should be noted that these individuals will be unwilling to take any risks. You might also think about making an investment in a recurring deposit or a fixed deposit if you aren't concerned about the potential tax consequences of your interest income and aren't sure whether the investment vehicle is tax-friendly.

Furthermore, recurring deposits (RD) and fixed deposits (FD) are low-risk investment options that offer guaranteed returns. RD is a type of deposit where you invest a fixed amount every month for a specified tenure. While FD is a lump-sum investment for a fixed tenure with a guaranteed return. Both offer higher returns compared to savings accounts, but their returns are generally lower than other higher-risk investments.

The goal of investing is to grow your wealth over time and beat inflation. Unfortunately, RD and FD do not exhibit this behavior. This is typically achieved through a diversified portfolio of investing in equity mutual funds like stocks and debt mutual funds like government securities and bonds. You can invest in debt mutual funds for a range of time periods, from a few days to several years, and they offer tax advantages.

Source: ET Now