SIP vs FD: SIP i.e. Systematic Investment Plan is a method in which you invest small amounts in mutual funds every month. FD i.e. Fixed Deposit is a traditional and safe investment option provided by banks and financial institutions.
SIP vs FD: When it comes to investment, most people also consider two popular options – SIP (Systematic Investment Plan) and FD (Fixed Deposit). Actually, both of these come with their own benefits and limitations. There are two types of investors in the market. One who does not want to take market risk. And the second who intend to earn higher returns by taking risk. In such a situation, both investment options have their own roles. What is the difference between these two investment options and which one can be better for whom, here we try to understand it.
What is SIP?
SIP i.e. Systematic Investment Plan is a method in which you invest small amounts in mutual funds every month. It is linked to the stock market and has the potential to give better returns in the long term. SIP has many advantages. It gives the benefit of compounding. Returns on investment also earn returns over time, which increases the capital rapidly. Also, units are available at an average cost in market fluctuations, which reduces the risk. It is beneficial for long-term goals like retirement or children’s education. Since SIP invests in the stock market through mutual funds, it has some level of market risk.
What is FD?
FD i.e. Fixed Deposit is a traditional and safe investment option, which is provided by banks and financial institutions. It gives a fixed interest rate on the amount invested and it is completely free from market risk for a fixed period. FD has its own advantages. In this, the investor gets fixed and stable returns. The interest rate on FD is fixed in advance, due to which the return can be predicted. It is suitable for those investors who give priority to the safety of capital. Some FDs are tax exempted under Section 80C.
Which to choose between SIP and FD?
According to ICICI Direct, choosing between SIP and FD depends on your financial goals, risk appetite and time horizon. If you want safety, stable returns and no market risk, then fixed deposits are a reliable option. However, if you want to accumulate wealth over a long period of time and can handle market volatility, then SIPs prove to be better. So, SIP or FD, which is better? There is no single answer. Ideally, a balanced approach combining both SIP fixed deposit strategies can help you get the best of safety and smart investing. Is SIP better than FD? For the long term, of course it is.
Understand these things before investing:
If you are a conservative investor and do not like to risk your hard-earned money, then you should choose FD. On the other hand, aggressive investors who want higher returns and are willing to take moderate to high risk on their investments can opt for SIP.
If you want to invest a lump sum amount, you can invest in FDs. If you want to invest small amounts at regular intervals and do not want to invest a lot, you can invest in SIPs.
If your main investment goal is to save capital and you do not expect much returns from it, you can invest in FDs. If you want to make goal-oriented investments that will give you higher returns, go for SIPs.
If you have a fixed investment period in mind, you can invest in FD schemes. On the other hand, if you are not sure about the investment period and want to withdraw money whenever the investment is giving you a reasonable return, you can invest in SIPs.
Most Read Articles:
- Highest interest on FD: These 6 banks are offering the highest interest on FD, a golden opportunity for investors
- Canara Bank: Deposit ₹ 1,00,000 in Canara Bank and get fixed interest of ₹ 14,888, know the details of the scheme
- Credit Card Link UPI: Link your credit card to UPI from home, know step-by-step guide
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at businessleaguein@gmail.com
