Subbu's Solution

I am a 25-year-old salaried person. I have invested Rs 5,000 for 12 months in recurring deposits.

Where should I invest the sum received upon maturity?

Also, I have a surplus of Rs 20,000 every month which I want to invest in RD again, is it advisable?
Generally at your age (young & earning) your portfolio should be more exposed to equities. With comparatively less responsibilities and more risk bearing capacity, you could make the most with equities. However, you need to be cautious as equities have the potential to give higher returns but the returns tend to be volatile. To mitigate the risk of volatility you could look at SIP in any prudent diversified equity mutual fund. The surplus of Rs. 20,000 can also be divided in multiple SIPs in equity funds, this way you will also balance out the risk factor and make yourself a disciplined investor.

RD, while good from the point of view of maintaining a discipline, may not meet your requirement to grow the investment. Interest on RD would be taxable. Sometimes the post-tax returns may not be enough to beat the inflation. Remember the long term capital gains on equity funds are tax exempt.

While I am not suggesting that you close your RD as it is relatively safe way to invest, provided the RD is with a good bank, I would urge you look at equity mutual funds.

At the end of one year, Rs 60,000 can again be invested in a FD, liquid fund or partly in them and partly in equity funds. Since you are a salaried person you can look at tax saving equity schemes too. Please consult your financial advisers before taking any major investment related decision.


Subbu's Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.

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