I am so glad you aren’t just blindly following what you husband is suggesting and are open to other avenues. So first up, your husband is not giving you the wrong advice, because recurring deposit has been one of the most common investment option traditionally.

But times have changed as has the market and the mutual fund industry. Previously the government regulated the interest rates in the country and hence, investors were able to generate higher interest rates, good enough to beat inflation. But with the deregulation in the economy, conservative investment instruments have failed to deliver impressive interest rates.

The following parameters will help you make an investment decision:

- Your risk profile: Your risk profile dictates your investment decisions and justifiably so. If you are one of those who can afford absolutely no capital destruction, then you should opt for a recurring deposit (RD) as these allow you to park some fixed sum on a monthly basis over the pre-decided tenure. In contrast, mutual funds, both debt as well as equity, are exposed to some risk due to market-based returns.

- Returns: In a falling interest rate scenario, RDs become relatively less attractive investment options due to lower interest rates. Even the highest return-fetching RD cannot beat the returns of equity or debt funds. Hence, in order to earn more than the inflation rate, you should consider investing in mutual funds as they provide better risk-return ratio. For example, only in the last five years, the compound annual growth rate of returns generated by diversified equity mutual funds are around 18%.

- Post tax returns are better in case of mutual fund SIP: As is the case with fixed deposits, in RDs too, if the interest amount for the given financial year exceeds Rs. 10,000 then it attracts TDS. Additionally, the income gets added to the income from other sources when filing return of income and gets taxed as per the slab rate of the individual.

In contrast, the taxation of mutual fund returns are far more tax-efficient, as long-term capital gains tax are now payable if the investment in equity mutual fund is redeemed after a period of one year at 10%, while the short-term capital gain is taxed at 15%.

If you have invested in debt funds for longer i.e. more than three years, then you also get indexation benefit at 20%. However, if your holding period is less than three years, then returns are taxed as per the income tax slab of the investor. concerned.

Given all the above reasons, it is clear that you must mobilise your funds in a disciplined and well-researched manner so that not only do you earn significant returns but are also able to meet your long-term financial goals.

Considering you have just started working, you should think of investing via SIPs which not only give you the benefit of rupee-cost averaging and compounding, both of which have the power to give you substantial returns provided you stay invested through the tenure.

A few funds you could consider investing in:

Debt funds

- ICICI Prudential Long-Term Plan

- SBI Dynamic Bond Fund

- HDFC High Interest Fund – Dynamic Plan

- Reliance Dynamic Bond Fund

- Birla Sun Life Income Plus – Retail

Mid-cap funds

- Mirae Asset Emerging Bluechip Fund

- L&T Midcap Fund

- Aditya Birla Sun Life Pure Value Fund

- Canara Robeco Emerging Equities Fund

- HDFC Mid-Cap Opportunities Fund

Large-cap funds

- SBI Bluechip Fund - Reliance Top 200 Fund - Mirae Asset India Opportunities Fund - Quantum Long Term Equity Fund - Aditya Birla Sun Life Frontline Equity Fund