Time and again I have come across investors who shy away from equity investing or so to speak they do not understand how this market functions and are neither keen to invest into products such as the mutual fund, debt funds or in the equity market.
All that they look for is the safety of their capital amount and are pretty happy; earning a small rate of 6 to 7.5% p.a., even though such returns cannot even beat the market inflation rate but so what they are still contented with it.
So then how does this ladder strategy works? Let’s take an example of this:-
Suppose you created an online recurring deposit account in the following manner : –
1st RD created on 01/06/2019 for 1,000/-
2nd RD created on 01/07/2019 for 1000/-
3rd RD created on 01/08/2019 for 1000/-
4th RD created on 01/09/2019 for 1000/-
5th RD created on 01/10/2019 for 1000/- and the cycle goes on till you create the 12th RD account on 01/05/2020.
So in such a situation in June 2019, only 1,000 will be debited from your account, and with each new month, this debit amount will keep increasing further by 1,000 from your account and by the time one reaches the month of May 2020 an amount of 12,000 would be debited from one’s account.
After every 12 months, one of your RD accounts will start maturing. Such type of an investment strategy works well for such investors who are either risk averse or those who struggle hard to save regularly. Like – those who have recently got their first job or those who are a spendthrift but wonder if they can still save some money each month.
Thus, by playing a safe bet, they are gradually able to amass their investment corpus. Please note that such type of investment strategy is only meant for those who want to inculcate a savings strategy.
Well, how does it sound quite complicated or easy? The idea is simple to create a forced monthly saving, and as you understand the value of investing regularly, one can start a SIP in mutual funds and so on.
I hope this was informative till then Happy investing.