Investment tips for beginners: Traditional FDs or Green FDs?
Fixed Deposits have been popular with Indians with an appetite for low risk and optimal returns in the long term. We all must have heard them listed among the best retirement planning tips and investment tips for beginners. Being immune to market volatility, FDs also add financial stability to the investment portfolio, making them best for people in their 20s seeking to secure their retirement well in advance.
Recent times have witnessed heightened public concern over the pressing issue of climate change, and seeing a lack of resources and knowledge as primary inhibitors for action against the environmental challenges, the RBI launched the Green FD Framework in June of this year. RBI also claims that Green FDs are different from traditional FDs only in terms of usage. Funds raised from Green FDs would be allocated to green initiatives that focus on carbon emission reduction, climate resilience, adaptation, and enhancing natural ecosystems and biodiversity. Accordingly, to allure substantial cash inflows into sustainable development, the RBI’s Green FD framework offers market-leading interest rates.
In a nutshell, the Green FD is a commendable initiative that allows people to invest their wealth in action against global warming and later profit from it. Individuals who want to utilize their wealth for the environment can invest in Green FDs and reap optimal returns later, knowing that their money was used for good.
But are they as profitable as claimed?
There are certain drawbacks and risks associated with Green FDs that ought to be considered before investing in Green FDs. One of them is the interest rate. Since the funds raised from green fixed deposits will be utilized for green initiatives, the borrowers will probably get the benefit of a lower rate of interest. However, this will reduce the interest rates offered to investors, making them hesitant to invest in Green FDs. Alongside a lower interest rate, there are no penalties if banks don’t utilize green funds, which can also reduce investors’ motivation. Furthermore, money raised from traditional FDs gets invested in diverse financial instruments, which gives stability to the investors. However, in the case of Green FDs, changes in regulations and technological challenges in green projects may lead to instability in returns.
In Conclusion, investing in Green FDs is profitable, and those seeking investing tips for beginners can trust their sources for the financial profits they would provide in the long run. However, in comparison to Green FDs, traditional FDs offer stable and slightly higher rates of return. Thus, investors with an appetite for stable and higher returns are advised to choose traditional FDs over Green FDs.
Lastly, investors are always advised to choose an FD plan which aligns with their long term financial goals, income, expenditures, etc.
