SIP vs RD: Which one gives more returns on investing Rs 10,000 per month..
SIP vs. RD: While saving every month is a good habit, investing that money in the right place is even more important. Two of the most popular investment options are SIP and RD. Both require a fixed monthly deposit, but their method and returns differ. Now, most people wonder which of these two options is better for them. If you're considering investing, let's explore which one can yield the most benefits by investing ₹10,000 per month.
What is SIP?
SIP, or Systematic Investment Plan, is a method of investing a fixed amount each month in mutual funds. You continue to invest regularly, whether the market is up or down. The biggest advantage of SIP is compounding. This means that profits are reinvested and used to generate further profits. This money can grow rapidly over the long term.
Now, if you invest up to ₹10,000 every month for 5 years in a SIP and earn an average annual return of 12%, then:
Total Investment: ₹600,000
Total Amount: Approximately ₹824,864
Keep in mind, this return is not guaranteed as it depends on market conditions. Simply put, a 12% return is not guaranteed; the actual return depends on market conditions.
What is an RD?
Post Office Recurring Deposit (Post Office RD) is a government scheme. A fixed amount is deposited every month and earns a fixed interest. Currently, Post Office RD offers an annual interest rate of around 6.7%. There is no market risk involved, so it is considered a safe option.
If you deposit Rs 10,000 every month for 5 consecutive years in an RD, then:
Total investment - Rs 600,000
Maturity amount - approximately Rs 714,364
Returns are fixed here, but growth is limited.
SIP or RD: Which is better?
As mentioned above, a SIP can yield approximately Rs 8.24 lakh in 5 years, while an RD can yield approximately Rs 7.14 lakh. This means a difference of approximately Rs 1.10 lakh. If you want higher returns and can tolerate market fluctuations, a SIP may be better. However, if you want safe and assured returns, an RD is the right choice. Ultimately, the decision depends on your goals and risk tolerance.
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