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When you plan your investment portfolio, it’s a good idea to choose those financial instruments that do not require you to make mandatory investments each month. With this strategy, you gain financial flexibility i.e. you can invest whatever amount you can into your investment portfolio at that point in time.
Suppose you choose to include a Post Office Recurring Deposit with a mandate of Rs 5,000 per month in your investment portfolio. When you make this choice, you’re locked into depositing Rs 5,000 each month for the next 60-months. On the good side, it does bring discipline, but on the flip side you loose an equal amount of financial flexibility, which I believe ought to be a strong consideration whenever you make a choice of investment.
Now, if you’re looking for both discipline and flexibility, a good option would be to try and minimize the lock-in as far as possible — in this case, you could opt for a 12-month Recurring Deposit at your bank.
Personally, I am locked into one such deposit. The first thing I do each month on salary day is to set this amount aside — I call this my EMI (Equated Monthly Investments).
What do you think?
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