SIP vs FD: Which can create higher corpus on Rs 6 lakh investment in 10 years?
Fixed deposit (FD) requires a one-time investment and offers a fixed interest rate during the specific term. On the other hand systematic investment plan (SIP) requires a regular investment, it could be daily, weekly, monthly, yearly, or half-yearly. FD is a non market-linked investment whereas SIP is a market-linked investment. Thus, we will compare SIP vs FD to find out which will create higher corpus on Rs 6 lakh investment in 10 years.
If you are confused about whether SIP is better than FD or FD is better than SIP. This article will clarify some of the concepts to help you get to a conclusion. FD involves a lump sum investment at one time. Whereas, SIP involves investment of fixed amounts at regular intervals. FD is suitable for all investment goals, on the other hand, SIP is suitable for short-term and long-term goals. The choice between the FD and SIP depends on individual financial goals and risk tolerance. Thus, let’s find out which can generate higher corpus on Rs 6 lakh investment in 10 years.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
Fixed deposit (FD)
Fixed deposit (FD) is one of the popular ways to invest money. They are non-market-linked investments with stable returns. It allows investors to invest a lump sum amount for a fixed period, earning a predetermined interest rate throughout the investment period.
Systematic investment plan (SIP)
A systematic investment plan (SIP) is a way of investing a fixed amount in a mutual fund SIP. One can start with a small amount of Rs 100.
How does FD work?
It requires a one-time deposit for a set period of time with a fixed interest rate.
How does SIP work?
A fixed amount is automatically deducted from your bank account and invested in mutual funds. These investments happen regularly, and you get units based on the fund’s value (NAV).
Benefits of FD
FD provides flexible payout options
FDs are transparent and have a predetermined return structure.
FDs are not subject to market fluctuations
Benefits of SIP
Through the power of compounding, SIPs can offer significant long-term growth potential.
SIPs encourage financial discipline by committing to regular investments.
FD calculation conditions: Rs 6 lakh investment for 10 years
Yearly investment: Rs 6,00,000
Time period: 10 years
Rate of interest: 7.5 per cent
FD: What will be your corpus in 10 years with Rs 6,00,000 investment?
The maturity amount in 10 years will be Rs 12,61,410, and the estimated returns will be Rs 6,61,410.
SIP investment conditions
In SIP, we will do the calculations on monthly investment i.e. Rs 6,00,000/120 which will result in Rs 5,000 monthly SIP.
Since there are no fixed returns in SIP investment, we are calculating as per annualised returns of 8 per cent (debt fund), 10 per cent (equity fund) and 12 per cent (hybrid fund)
SIP: Retirement corpus on Rs 5,000 investment for 10 years (hybrid fund)
At 12 per cent annualised return, the estimated investment amount will be Rs 6,00,000. The estimated capital gains will be Rs 5,61,695, and the estimated retirement corpus will be Rs 11,61,695.
SIP: Retirement corpus on Rs 5,000 investment for 10 years (equity fund)
At 10 per cent annualised return, the estimated capital gains will be Rs 4,32,760, and the estimated retirement corpus will be Rs 10,32,760.
SIP: Retirement corpus on Rs 5,000 investment for 10 years (debt fund)
At 8 per cent annualised return, the estimated corpus in 10 years will be Rs 9,20,828. The estimated capital gains will be Rs 3,20,828.