Invest in Credit Risk Mutual Fund or not?

We all know that accumulated drops make a waterbody. But did this thought ever cross your mind that your humble lunch-snack bills saved since March last year could have netted you over Rs 1 lakh if you had invested the money in a recurring deposit scheme?

In fact, if you continue this discipline till February 2022, you would net a cool Rs 1.5 lakh even on a conservative estimate.

With a large part of the country’s organised sector employees, especially information technology, insurance, banking and fintech companies using ‘Work From Home’ (WFH) facility and deciding to extend the period up to December 2021, this amount is not going to be insignificant.

Financial advisors put the lunch-snacks bill at Rs 200 per day if an individual has to attend office. Therefore, the amount an individual spends in 30 days is Rs 6,000.

If WFH continues till February 2022 and an individual starts saving the money in a recurring deposit scheme, the nominal amount is Rs 144,000.

Considering a rate of interest of 5.5%, the amount becomes Rs 1,52,507 in two years.

If you have a small appetite for risk and invest in a monthly SIP of Rs 6,000, the amount may jump to Rs 1,90,873 (sample calculation of Franklin Asian Equity Fund – Growth). Even at a conservative estimate, it will grow to about Rs 1,60,000 as indicated by the State Bank of India MF counter.

The interest rates offered by recurring deposit accounts is 5.8%. Banks such as SBI, HDFC, ICICI, BOB, PNB generally offers rates of 5.1-5.2% for a tenure of 24 months.

On the other hand small finance banks such as Utkarsh offers a rate of 8% and Jana Small Finance Bank gives 7% for 24 months. Invested in these entities will increase the money to around Rs 1.55-1.56 lakh after the maturity.

With that amount, one can buy a jumbo screen smart TV and an iPad with the best features.