Both FD and RD offer ways to achieve your financial goals. (Representative image)
Choosing between FD and RD depends on your financial goals, risk tolerance, and liquidity needs.
Saving money is an essential aspect of financial well-being and serves as the cornerstone for a secure and stable future. It provides a safety net during unexpected situations, empowers you to pursue your aspirations, and enables you to achieve your long-term financial goals. Savings through products such as Fixed Deposits (FDs) and Recurring Deposits (RDs) further amplify the importance of savings.
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FDs offer a stable and safe way to grow savings at a fixed interest rate, making them ideal for individuals who want to preserve capital while earning predictable returns. Meanwhile, RDs provide a disciplined approach to savings by allowing for regular contributions over time, helping you build up funds consistently for future needs or goals.
Choosing between FD and RD depends on your financial goals, risk tolerance, and liquidity needs.
Term Deposit (FD):
- Lump sum investment: FDs require a one-time lump sum deposit.
- Fixed interest rate: A fixed interest rate is applied at the time of investment and remains constant throughout the investment period.
- Flexible Tenure: You can choose the tenure of your FD, usually from a few months to several years.
- Interest payment options: Depending on your preference, you can reinvest the interest at a compounded rate or pay it regularly.
- Low Liquidity: Stopping an FD before maturity may result in penalty and loss of interest.
Term Deposit (RD):
- Regular Savings: RDs allow you to save a fixed amount on a regular basis, usually every month.
- Flexible deposit amount: You can choose your deposit amount each month.
- Fixed Interest Rate: Similar to FDs, RDs offer a fixed interest rate for the entire tenure.
- Fixed Period: RD has a fixed period and the maturity amount is predetermined.
- High Liquidity: RD has better liquidity compared to FD as you can withdraw your savings or take out a loan in case of emergency.
FD or RD? Which one should you choose?
Both FD and RD offer a way to achieve short-term financial goals, such as building an emergency fund, as well as long-term goals, such as purchasing a home or financing higher education. By incorporating FDs and RDs into your savings strategy, you can leverage the power of compound interest and disciplined savings habits to strengthen your financial health and build a brighter future.
Which one is better depends on your financial goals and preferences. If you have a fixed amount to invest and do not need liquidity, FDs may be right for you. On the other hand, if you save regularly and prefer liquidity, RD may be a better option. It is important to evaluate your financial situation and consult with a financial advisor before making any decisions.
disclaimer: The expert views and investment tips contained in this News18.com report are the opinions of experts and not the opinions of the website or its management. Readers are advised to check with certified professionals before making any investment decisions.