SIP vs FD: What will be your return on Rs 6,50,000 investment in 10 years?

Investing wisely is crucial for financial growth, and two popular options in India are Systematic Investment Plans (SIPs) and Fixed Deposits (FDs). Both offer distinct benefits, but which one provides better returns over a 10-year period? Let’s compare.

Systematic Investment Plan (SIP)

A Systematic Investment Plan (SIP) is a disciplined way of investing in mutual funds. It allows investors to contribute a fixed amount at regular intervals instead of making a lump sum investment. This approach benefits from market fluctuations and the power of compounding, making it ideal for long-term wealth creation.

How SIP Works

When you opt for an SIP, a fixed amount is automatically deducted from your bank account at regular intervals and invested in a mutual fund scheme. The investment amount buys mutual fund units based on the prevailing Net Asset Value (NAV). Over time, additional units accumulate, increasing the invested corpus and potential returns.

SIPs are flexible and can be started anytime. However, selecting the right mutual fund scheme is essential to maximize returns.

Also Read: Return Comparison: SIP or PPF? Which can build larger corpus on Rs 1,30,000 annual investment?

Expected returns on SIP investment

For an investment of Rs 6,50,000 over 10 years with an assumed 12% annual return, the estimated outcome would be:

• Monthly investment: Rs 5,417
• Total investment: Rs 6,50,040
• Estimated returns: Rs 5,63,562
• Total value: Rs 12,13,602

Fixed Deposit (FD)

Fixed Deposits (FDs) are a secure and reliable investment option, providing assured returns at a fixed interest rate. Offered by banks and post offices, FDs are best suited for risk-averse investors seeking stability.

Also Read: SIP vs Sukanya Samriddhi Yojana: Which can offer higher returns on Rs 80,000/year investment over 15 years?

Key features of FD

FDs can be opened with a minimum amount of Rs 1,000, with no upper limit. Interest is calculated quarterly but paid annually. A 5-year FD qualifies for tax benefits under Section 80C of the Income Tax Act.

Expected returns on FD investment

For an investment of Rs 6,50,000 in an FD with an assumed 7.5% annual interest rate, the estimated outcome would be:

• Invested amount: Rs 6,50,000
• Estimated returns: Rs 7,16,527
• Total value: Rs 13,66,527

SIP vs FD: Which one should you choose?

SIPs have the potential to generate higher returns compared to FDs, but they come with market risks. Mutual funds fluctuate with stock market trends, making them suitable for investors willing to take moderate risks for long-term wealth creation.

On the other hand, FDs provide guaranteed returns with no market dependency. They are ideal for those seeking security and steady income, especially for short-term goals.

For long-term wealth creation, SIPs can be a better option due to the power of compounding. However, if stability and assured returns are your priority, FDs remain a safe choice. 

(Disclaimer: This is an not investment advice. Do your own due diligence or consult an expert for financial planning)