What Is A Suitable Tenure For Rd Investments?

By Author: Shreya Eppili
Total Articles: 19
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Financial growth is something you should actively strive for. It puts extra money into your pocket to do things you always wanted to do for yourself and your loved ones. Most individuals think financial growth comes with career advancement, which is true. However, there are other ways to achieve financial growth, investments being one. They build a significant financial corpus over time.
Investments are a massive financial decision. Hence, consider your investment profile to make a suitable choice. A Recurring Deposit is a simple investment option that you can invest in irrespective of your investment profile. It needs you to make periodic contributions over a tenure. You earn a competitive RD interest rate on them. This means you can build a corpus systematically and profitably.
You can invest in an RD for any tenure between six months to 10 years. Since tenure impacts your investment returns, you need to choose a suitable tenure. Now, you may wonder what an ideal investment tenure means. The following pointers might help:
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... Investment goals
Whenever you make an investment, you do so with a purpose. Your goal can be anything from financing your child’s dream of higher education to funding an international trip or building a contingency fund for emergencies. Suppose your goal is to build a corpus to finance your child’s higher education. Quantify this goal. Let’s say you need Rs. 50 lakh to fund your child’s higher education.
Since it is a significant amount, you may need to invest for a longer time to build it. Opt for an investment tenure accordingly.
Investment amount
The investment amount is the deposit you intend to make in your Recurring Deposit every month. The more significant the amount, the better. Contributing a significant amount can help you build a substantial corpus in a decent time.
Let us consider the stated example. If you invest Rs. 30,000 per month at an interest rate of 6.5%, you can build a corpus worth Rs. 50 lakh in 10 years. If you invest Rs. 35,000 per month at the same interest rate, you build a corpus worth Rs. 50 lakh in nine years. So, if you can invest only a basic amount, you may need to invest for a longer tenure, and vice versa.
Applicable interest rates
The interest rate impacts how quickly you can build a desirable corpus. Look for higher RD interest rates to build a corpus within a shorter tenure. Suppose you invest Rs 35,000 per month at an interest rate of 7%. You can build a corpus worth Rs 50 lakh in nine years. However, if you invest the same amount at an interest rate of 10%, you build the corpus within eight years.