Where to invest when you don't know how to invest

Let me start this way, not all of us are good in understanding the market and some of us who understand a bit are usually for the field of finance. But what about the rest of us who does tried hard and are tired of understanding and are always looking for investment opportunity but have no clue how to proceed. Investing is not everyone's cup of tea. Even if some of us manage to invest but chances of growing our investment are minimal. I am not discouraging anyone but this is the truth.

Let us accept that not all of us are good in trading in shares including me and we also don't want to pay someone to manage our investment.

So what do we do?

Over the years one of the most sought after investment option among all the class of income has been fixed deposit (FD).

What is FD?

Fixed deposit is basically deposit with the bank which gives us fixed return over a predefined period. Lump sum amount is deposited with the bank at a fixed interest rate at the start of the FD term.

However one may face certain issues while investing in FD like:

One may not have sufficient funds to start FD Even if funds are available many may not prefer to block their money for long period. They may wish to retain their funds to meet any contingency. If an individual has just started working, he may not have enough saving to invest. So what can be done?

Not many of us are aware but banks also provide recurring deposit facility (RD). It is similar to FD in all its aspects except in RD the payment is deferred over the period of RD. Also, the interest accumulated on RD shall be lower as compared to FD.

Let us take an example to understand the basic difference among the two. Suppose Mr. X invests INR 10,000 in FD for a period of 10 months so interest will be received on entire amount for 10 months. Whereas, if Mr. Y invests in RD, he may be required to deposit each month INR 1,000 for 10 months each. The interest he would be entitled to would be for 1stmonth on 1000, 2ndmonth on 2000 and so on with interest on entire 10,000 in the last month. So Mr. Y will get less interest as compared to Mr. X Should one opt for fixed deposit or recurring deposit? RD may not be the best investment option but when someone has loose hand in saving or someone who does not wish to invest in lump sum; it is surely the option one can consider. It is specifically suggested to young professionals who find it difficult to save.

All said and done if some has savings and is able to save easily, FD is a good option and for other spend thrifts RD is more beneficial.