What is a systematic deposit plan and why should you invest in it?
fixed deposits (FDs). This presents a favourable investment prospect for cautious investors seeking to increase their wealth without exposure to market risks. However, not everyone can afford to invest in large fixed deposits at once.
Consequently, some individuals opt for smaller fixed deposits, enabling them to take advantage of fluctuating interest rates. The underlying concept behind these investments is to foster the growth of capital and generate additional income over the long term. While some may advocate for recurring deposits, it’s essential to have a steady income stream to consistently invest at predetermined intervals.
This is where choosing systematic deposit plans (SDPs) can be beneficial. A systematic deposit plan is an investment option provided by certain banks and financial institutions. It enables individuals to make consistent, fixed-amount deposits into an FD over a predetermined period.
Essentially, it combines features of both an FD and a systematic investment plan (SIP). Not many people are aware of how an SDP works. Simply determine the desired investment duration (tenure) and the monthly deposit amount to get started.
With a minimum deposit requirement of as low as ₹500, it becomes an accessible option for a wide range of investors. Subsequently, initiate regular deposits by contributing the specified amount to your SDP each month. Each deposit functions as an independent FD with its distinct maturity date.
Every deposit accrues interest at the prevailing interest rate on the date of its initiation. This results in the advantage of compound interest, wherein the interest earned on each deposit is reinvested. Upon the completion of each deposit’s tenure, you receive both the principal amount and
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