NEWS & ADVICE : FIXED DEPOSITS
Recurring Deposits or Systematic Investment Plans : Which seems better?
By Neelima Shankar
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Pros and Cons of Recurring Deposits


Pros

  • No fluctuations in Recurring Deposits compared to SIPs which are equity linked, and hence the returns are based on the performance of stock markets.
  • Covered by Deposit Insurance and Credit Guarantee Scheme of the Government, and are one of the safest investment option.
  • Recurring deposits have a Higher credit rating compared to the riskier equity based SIPs.

 
Cons

  • Recurring deposits give consistent, but low returns, which in times of uncertain economies are unable to cover the inflationary pressures.
  • Although the reccurring deposits offer safe and fixed returns, but in times of bull market, they can not capitalize the returns from market.

Inference


It would be inappropriate to say which of the two is better, because the risk appetite of the investor is all which is important in the end. It is generally advised to young investors to make a mix of both with higher proportion of SIPs, because they can take risk, while for older and more conservative investors recurring deposits with fixed returns are more advisable. However, it is entirely at the discretion of the investor to choose the option matching his needs.


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