Bank Fixed Deposits (FDs)
– Secure investment for up to a year – Covered by Deposit Insurance (DICGC) – Online FDs available – Liquidity: Simple withdrawal with penalty – Returns: Varying rates (e.g., SBI - 5.25%, HDFC - 6%)
Recurring Deposit (RD)
– Flexible short-term investment (6 months to 10 years) – Monthly deposits for better returns – Liquidity: Premature withdrawal with penalty – Returns: Variable rates (e.g., SBI - 5.25%, HDFC - 6.60%)
Post Office Time Deposit (POTD)
– Consider for one-year tenure – Premature cancellation possible – Returns: 6.90% interest for 1-year (Jul-Sep 2023) – Liquidity: Withdrawal after 6 months, with interest – Tax Note: Post-tax return may be lower
Key Factors
– Safety and liquidity essential for short term – Prioritize risk reduction and access to funds – Choose low-risk options for ≤12 months
Decision Making
– Assess goals and risk tolerance – Consider investment horizon (≤1 year) – Compare rates, penalties, taxes – Choose aligned option