Mutual Fund SIP vs Sukanya Samriddhi Yojana: Which offers higher returns on a Rs 12,500 monthly investment over 15 years?
A Systematic Investment Plan (SIP) offers flexible, regular investments in mutual funds, benefiting from Rupee Cost Averaging and reducing market volatility risks. Sukanya Samriddhi Yojana (SSY), a government scheme for the girl child, provides attractive interest rates and tax benefits, ensuring long-term savings for education or marriage.
A Mutual Fund Systematic Investment Plan (SIP) allows you to invest a fixed amount in mutual funds at regular intervals, making it a popular option for disciplined, long-term investors. Offering flexibility and the advantage of Rupee Cost Averaging, SIPs help mitigate market volatility risks. On the other hand, the Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme for the financial security of the girl child, providing tax benefits and attractive interest rates, making it ideal for long-term savings for education or marriage.
What is an SIP?
- An investment route offered by mutual funds.
- Allows investing a fixed amount at regular intervals (monthly or quarterly) rather than a lump sum.
- Minimum installment can be as low as Rs 500 per month.
- Similar to a recurring deposit with an option to automate bank debits.
Benefits of SIP
- Encourages disciplined investing.
- Minimizes concern over market volatility and timing.
- Ideal for long-term investments.
Key Investment Mantra
- Start early.
- Invest regularly for maximizing returns.
How Does a Mutual Fund SIP Work?
Rupee Cost Averaging
- More units are bought when the market is low and fewer units when the market is high.
- The average cost of acquisition benefits from market fluctuations.
Market Risks
- SIPs are still subject to market risks and volatility despite cost averaging.
Mutual Fund SIP: Investment of Rs 10,000 monthly for 15 years
Mutual Fund SIP Equity
- Total investment: Rs 1,20,000
- Total interest: Rs 3,81,270
- Maturity value: Rs 5,01,270
Mutual Fund SIP Hybrid
- Total investment: Rs 1,50,000
- Total interest: Rs 4,76,587
- Maturity value: Rs 6,26,587
Sukanya Samriddhi Yojana: Investment of Rs 12,500 monthly for 15 years
- Total investment: Rs 1,50,000
- Total interest: Rs 3,11,839
- Maturity value: Rs 4,61,839
Sukanya Samriddhi Yojana (SSY)
Purpose
A government savings scheme designed for the financial security of the girl child.
Helps ensure long-term savings for the daughter’s education or marriage.
Key Features
- Attractive interest rates and tax benefits under Section 80C of the Income Tax Act, 1961.
- Contribution allowed for 15 years, but the account matures after 21 years.
- Interest accumulates throughout the maturity period.
Sukanya Samriddhi Yojana (SSY) vs Systematic Investment Plan (SIP)
SSY
A government-backed savings scheme for the girl child.
Offers high-interest rates and tax benefits.
Long-term savings with a maturity of 21 years.
SIP
A mutual fund investment option.
Potential for higher returns but subject to market risks.
Flexible and suitable for long-term goals.