How Can You Generate More Money Using FD and RDs Only?

The evolution of banking strategies around fixed deposits (FDs) and recurring deposits (RDs) encompasses a myriad of techniques designed to optimize your financial returns while minimizing risk. This article explores the blend of FD and RD strategies, providing you with a step-by-step guide to maximizing your potential earnings. From understanding the specifics of PSU banks, small finance banks, and postal schemes to executing the most effective investment strategy, we cover it all.

Strategy of FD and RD Combination

To generate more money using FDs and RDs, it's essential to comprehend the mechanisms and specific benefits offered by different banking institutions. Whether it's a PSU bank, a small finance bank, or a post office scheme, each institution offers unique advantages in terms of minimum investment requirements and interest rates.

PSU Banks and Small Finance Banks

PSU Banks: These banks often require a minimum amount of 1000 for an FD with even lower minimum installments (100). They also offer a high-interest rate, making them a preferred choice for those looking for optimal returns on their investments. For instance, an FD of 1000 with a minimum installment of 100 can yield impressive returns when paired with an RD in the same amount.

Small Finance Banks: Banks like ESAF offer minimum FD and RD investments of 1000 and 100 respectively. They provide excellent interest rates, making them an attractive option for investors who are looking for higher returns. Many other small finance banks also offer similar interest rates, ensuring a competitive investment environment.

Post Office Schemes

The post office offers RDs and term deposits (TD) that are easy to handle through internet banking. The minimum investment for an FD is 1000, while RDs start as low as 100. These deposits can be a great way to boost your investment portfolio safely and efficiently.

Now, the FD and RD Strategy

For a comprehensive and profitable approach to FD and RD investments, it's crucial to implement a well-planned strategy. Here's a step-by-step guide to help you achieve your financial goals:

Choosing Base Amount Only

1. Do Online Only: Opt for online investments to avoid physical paperwork and enjoy faster processing times. This approach ensures that you can manage your investments more efficiently.

2. Open 10 FDs of 1000 for periods 12, 15, 18, 21, 24, 27, 30, 33, 36, and 39 months: These different periods allow for diversification and regular income. The flexibility offered by these varying maturity periods ensures that you can reinvest regularly and benefit from compound interest.

3. Start 10 RDs for 100 for periods 12, 15, etc.: Opening RDs alongside your FDs ensures that you can make additional contributions regularly and benefit from the compounding effect. This dual approach maximizes your returns and diversifies your portfolio.

4. Each FD/RD Combination Will Mature on 12th to 39th Month: By structuring your investments in this manner, you ensure a gradual increase in your investment portfolio. Quarterly reviews and adjustments can help you identify the perfect investment strategy.

5. Consider Fixing FDs at 1500 to 2000 for periods 15 to 24 and RDs at 100 to 300 for periods 12 to 15: This strategic approach not only maximizes your returns but also allows for flexible reinvestment based on your financial needs.

6. Choose Small Finance Banks for Better Pay Outs: Opt for banks that offer higher interest rates than PSUs, ensuring that you receive optimal returns on your investments.

7. Open IPPB and Regular SB in Post Office: Activate internet banking to manage your deposits efficiently. Begin RDs for 100 to 500, and TDs for 1000 for periods of 12, 24, 36, 60, and 60 months to further diversify your investments.

Recurring Deposits and Fixed Deposits

Recurring Deposits: A recurring deposit allows you to save a fixed amount every month. For example, you can start with Rs. 500 per month, as the minimum amount is typically Rs. 500. For fixed deposits, the minimum amount required is Rs. 5000. Some private banks offer higher interest rates but may require a higher minimum investment of Rs. 10000.

When your RD matures, transfer the proceeds to a fixed deposit during a period when interest rates are highest. This ensures that you capitalize on the best possible returns for your investment.

General Investing Principles

To get the most out of your FDs and RDs, adhere to the following general principles:

Do Not Auto-Renew: Avoid placing your FDs in auto-renewal mode. On maturity, credit the amount to your savings account and decide where to reinvest for the best returns. Avoid Premature Withdrawals: Do not withdraw deposits early. In case of necessity, compare the terms and conditions of a demand loan or premature withdrawal to choose the option that costs you less. Invest for Compound Interest: Invest for more than six months to benefit from compound interest. Avoid short-term gains that do not accrue interest. Do Not Use Interest-Free Days: If you need to withdraw funds, ensure there are no interest-free gaps. Use electronic modes to transfer funds and prevent these gaps. Consider Flexi-Deposits: Flexi-deposits offer the benefit of automatically transferring surplus funds to a FD. Choose carefully when opening a flexi-account and consider transferring surplus funds through net-banking.

Remember, the key lies in understanding the investment environment, choosing the right banks, and implementing a strategic plan. By following these steps, you can generate more money using FDs and RDs effectively.