I have started working recently and wish to invest Rs 5,000 a month in mutual funds. However, my father thinks I should learn to save before I commit to invest money and suggested a recurring deposit. Which of the two is a better option? -Rajeev Bansal, New Delhi
Your intention to invest money regularly will go a long way in improving your future financial situation. Your father’s point of view has its merits in helping you with inculcating the habit of regular savings. However, the fundamental flaw with recurring deposits is the interest you earn in such savings—they are low and barely manage to match the inflation rate, forget beating it. In contrast, investing in equity mutual funds in the long run beats inflation and also builds wealth. We suggest you split your money into two and experience both the products for a year. This way, you will be exposed to both regular savings and investments. Invest in a balanced fund like Canara Robeco Balanced or Tata Balanced Fund to understand how mutual fund investing works. A year later, you would have the necessary practice to decide which of the two approaches works for you and deploy your money accordingly.
