SIP vs RD: What can be your corpus if you invest Rs 25,000 monthly in both of them?
Recurring deposit (RD) is a fixed interest rate investment option, while systematic investment plan (SIP) in mutual funds is market-linked. Both can create a sizeable corpus in the long run. Check what will be your corpus if you invest Rs 25,000 monthly in RD and SIP.
SIP involves setting up a fixed amount at fixed intervals for investment in mutual funds scheme. Whereas, RD is a small savings scheme in which one has to invest monthly. SIP in mutual funds is market-linked, while RD provides guaranteed returns. We will discuss the salient features of SIP and RD, and will also calculate estimated corpus build from Rs 25,000 monthly investment in both RD and SIP.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
Read more: SIP vs FD: What will be your return on Rs 6,00,000 investment in 12 years?
What is recurring deposit (RD)?
RD is a type of small savings account where individuals deposit a fixed amount of money each month for a set period. These are recurring deposits at post offices and banks that people open for a particular tenure.
What is SIP?
A Systematic Investment Plan (SIP) is a simple and disciplined way to invest in mutual funds. It allows individuals to invest a fixed amount at regular intervals, be it daily, weekly, monthly, quarterly, or yearly.
Account opening in RD
An RD account can be opened in any post office or bank through a savings account. It can be opened offline and online.
How SIP can be started
A systematic investment plan requires the selection of suitable mutual funds that the investor wants to invest in.
Maturity period of post office RD
The maturity period of the post office RD is 5 years. The account can be extended for 5 years.
Tenure of SIP
SIPs do not have any specific tenure. One can start or stop SIP as per their wish or investment capacity.
Who can open RD account?
Here, we are talking in the context of post office RD
A single adult
Joint Account (up to 3 adults) (Joint A or Joint B)
A guardian on behalf of a minor
A guardian on behalf of a person of unsound mind
A minor above 10 years in his name.
Who can open SIP account?
Anyone 18 and above can invest in SIPs.
Deposit amount in RD
The minimum amount for a monthly deposit in post office RD is Rs 100 and above.
Deposit amount in SIP
The minimum amount for a monthly deposit in SIP is Rs 100 and above.
Risk involved in RD
Recurring deposit is one of the safest options for investment. It is non-marked-linked and provides guaranteed return.
Risk involved in SIP
The risks involved in SIPs depend on the type of mutual fund an investor picks and the overall market condition.
Frequency of investment in RD
One can make monthly investments.
Frequency of investment in SIP
Investors can invest daily, weekly, monthly, quarterly, or yearly.
RD (Recurring Deposit): Returns on a Rs 25,000 monthly investment?
Time period: 5 years
Total Invested Amount: Rs 15,00,000
Interest Rate: 6.7% per annum (interest rate of post office RD)
Estimated Returns: Rs 2,84,148
Total Value at Maturity: Rs 17,84,148
SIP (Systematic investment plan): Returns on a Rs 25,000 monthly investment?
Time period: 5 years
Total Invested Amount: Rs 15,00,000
Rate of Annualised Return: 12% per annum
Estimated Returns: Rs 5,62,159
Total Value at Maturity: Rs 20,62,159