Is a Recurring Deposit a Good Investment

1. Investments in recurring deposits are made on a regular basis, most frequently on a monthly basis. 
2. Investors of recurring deposits get fixed returns based on the interest rates offered by the bank where the investor has opened their recurring deposit account. 
3. Recurring deposit comes with a maturity date. The duration of recurring deposits varies depending on the bank's rules and regulations. It is typically one year. If the investor wants to keep making recurring deposits after the tenure is over, they must begin a new one. 
4. Bank recurring deposits provide set rewards based on interest rates because they are unrelated to market performance. 
5. There is no risk of capital loss when purchasing a bank's recurring deposit, making it the safest investment for an investor. 

1. Investors can access liquidity through recurring deposits. Investors may at any moment withdraw their money from recurring deposits by paying an early withdrawal penalty. 
2. Investors can access liquidity through recurring deposits. Investors may at any moment withdraw their money from recurring deposits by paying an early withdrawal penalty. 

Advantages of Recurring Deposits 

The various advantages of recurring deposits are mentioned below 

Helps plan short term goals - Recurring deposits are entirely risk-free investments that provide assured profits. If your investment goals are short-term, mutual funds and stocks may not be the safest choice. Due to the nature of RD, investors who are thinking about achieving short-term objectives in a time frame of 1 to 3 years opt to participate in recurring deposits. 

Easy investment - In a recurring deposit plan, the investor must deposit a set amount each month in order to develop a discipline around saving money. It will be simpler for salaried clients to set up a specific sum each month as savings, and for this, recurring deposit is the best choice. Additionally, RD schemes offer guaranteed returns and have their interest rates fixed in, shielding investors from changes in interest rates. 

Online features - The investors can update information, examine transactions, view deposit details, terminate the RD account, start another RD, make deposits, close the RD account, and do a lot more online. 

Flexibility - Some banks provide flexible recurring deposit plans so that the investor won't face consequences if the money isn't deposited on a certain month. Investors will also be able to withdraw money from their RD account whenever they wish under a flexible RD scheme. 

Disadvantages of Recurring Deposit (RD)

The disadvantages of recurring deposit are mentioned below 

1. Interest rate - Since the investor's deposits are made in tiny amounts rather than all at once, the interest rate they get on recurring deposits is substantially lower than that of the standard fixed deposit scheme. 
2. Liquidity - When the investor makes a deposit into a recurring deposit, they won't be able to take any of the money out until the term of the deposit has expired. Recurring deposits are thus a terrible idea if the investor is searching for an instrument that makes it easy to access liquidity. However, if the investor wants to discipline their savings, this drawback might be advantageous. 

How to Calculate Recurring Deposit Interest Rates? 

Recurring deposit returns are based on the fixed interest rates provided by banks. By selecting a bank that offers a high interest rate plan on recurring deposits, the investor can identify the greatest returns on recurring deposits. The following formulae are used by the majority of Indian banks to determine the returns on recurring deposits.

M = R [(1+i) ^n-1]/ (1-(1+i) ^ (-1/3)) 

Here,  

M = Maturity value 

R = Monthly RD installments 

N = Number of quarters in a year 

I = Interest rates 

How to Open a Recurring Deposit Account? 

Apart from all the major private and public banks, even the Post Office offers recurring deposits account. To open a recurring deposit account, you can follow the steps that is mentioned below 

Step 1:  To open a recurring deposit account if you already have an account with the bank, get in touch with the branch office or customer service line that is most convenient for you. 

Step 2:  You must call the local branch and submit an application if you want to start a recurring deposit account at a bank with which you do not already have an account. In order to open an account, you must also submit basic KYC documentation. 

Step 3:  The tenure and monthly due amount (deposit amount) should be chosen while starting a recurring deposit account. Online fund transfers, ECS, and online banking can all be used to make recurring deposit payments on a monthly basis. 

Conclusion 

With all the advantages and features of recurring deposits, it is safe to say that they are a very secure and safe kind of investment for investors. 

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