💵 Why FDs and RDs are bad?

Debating over FDs and RDs and why can they be bad for young investors and shedding light on when to invest in fixed deposits.

First things first, let’s try to understand what are fixed deposits and recurring deposits. Well, recurring deposits and fixed deposits are the amounts that you pay to the bank for a period of time and banks hold your amount for that holding period that you mention (ideally 6 months minimum) and return you the amount with an interest. Sounds a great way of saving your money isn’t? Also, fixed and recurring deposits are highly bolstered by our parents (my parents did) and the banks too market the FDs and RDs actively.

So should we invest in them?

No. Definitely not.

The returns that banks provide are typically around in the range of 4-5.5% (maximum of 6% for senior citizens) per annum which means if you invest 1000 INR for one year you will get a return of 60 and at the end of the year, you will have 1060 INR. But what is the real issue here? Any type of investment should give you commendable returns that beat inflation. In India, the inflation rate is ~5% and the 60 INR that you get as a return for a 1000 investment becomes obsolete.

And if your financial goals are way too high, FDs and RDs make no sense. How did I know these? Well, I made the same mistake. I had very super high financial goals and realized how these deposits were bad and I made this self-realization at an early stage and I was able to reconcile very quickly.

Are deposits that bad then?

Well, FDs and RDs aren’t that bad provided if you are able to invest a huge amount. A very huge amount like 10 Million. That’s when you can get an interest amount that is admissible. Also, bank deposits are highly commendable and recommended only when you are about to retire.

Why?

1. You can’t take risks when you retire. You need to play a safe game and not advised to invest in any of the volatile markets.

2. Also, the interest rate is comparatively high for senior citizens.

💡PRO Tip - Take an RD or FD on any of the women senior citizens in your home. You will get the maximum interest rate.

So, to cut a long story short, invest and grow your money until your 50s and consume as much risk as possible. And divert all of your investments into your RDs and FDs when you retire and lead a risk-free life not worrying about the market volatility.