Systematic Deposit Plan (SDP): How to get high returns on investments like FD through systematic deposit plan

Systematic Deposit Plan (SDP): Investment is the best tool for secure future. People who know the power of investment make sure that they save some money regularly every month that they can invest in some scheme that can give them some good results. There are investment options like government schemes for guaranteed returns and fixed income as well as there are market-linked investments such as stock trading and mutual fund investment.

The eventual purpose of all investments, however, is to help grow the investor's income. Systematic Deposit Plan is one such investment option that can help grow your money.

What is it and how is it different from fixed deposits (FDs), we will tell you in this write-up.

What is Systematic Deposit Plan?

Systematic Deposit Plan (SDP) is a type of recurring deposit (RD) scheme, in which you deposit money on a regular basis, but the deposit you make is considered as a fresh FD and the interest rate applicable at the time you start the FD is applicable.

This means that you earn more interest on every deposit due to different interest rates, whereas in a normal FD, you earn more interest on the entire amount at a fixed interest rate.

The interest is calculated after maturity.

Besides, one of its specialties is that you can invest in it little by little and many times.

Like you can invest Rs 2000-3000 every month as per your capacity.

That is, unlike a FD, where you need a large amount to deposit at once. 

What are the benefits of Systematic Deposit Plan?

Through this, you can create a good fund for yourself through SPD even with less investment. It has many benefits.

• One advantage of this is that if you make a deposit, the interest rate applicable on it will remain fixed till its tenure. With this, you will not have to worry about the principal amount and maturity amount.
• You can avail the benefit of premature withdrawal on SDP. If any need arises, you can withdraw your deposit before it becomes premature.
• You can also choose flexible tenure as per your convenience. If you want to prepare funds for long term, you can take advantage of compounding and get higher returns. At the same time, if you want to invest for short term, you can invest for that.

Are their some shortcomings of Systematic Deposit Plan?

1. There is a provision of applying the current interest rate with every deposit.

It can also become a drawback if the interest rate on fixed deposits has been reduced and you are depositing money during this period, then you will get the low interest rate.

However, in recurring deposit, you get the same interest on every installment as it was at the time of starting the investment.

2. You will have to pay penalty on premature withdrawal, as is the case in most investment schemes.

But if you are such an investor who cannot invest a large amount at one go, and find it easier to invest little by little, SDP can be a very good option for you.

With this, you can get high returns on regular investment.