SIP vs FD: What will be your return on Rs 8,00,000 investment in 5 years?
Compare SIP and FD to determine the better option for investing Rs 8,00,000 over 5 years. Understand returns, risks and benefits.
Systematic Investment Plan (SIP) and Fixed Deposit (FD) are two popular investment options catering to different financial needs. SIP involves regular investments in mutual funds, benefiting from market growth and compounding. FD, on the other hand, is a risk-free term deposit offering fixed returns over a predetermined period.
(Disclaimer: This is not an investment advice. Do your own due diligence or consult an expert for financial planning)
Systematic Investment Plan (SIP)
A SIP involves periodic investments in mutual funds, enabling disciplined savings with the benefit of compounding.
How SIP Works
The investment amount is auto-debited and invested in mutual funds at their Net Asset Value (NAV), growing through compounding.
Compounding Effect in SIP
Every SIP installment buys additional units, which reinvest returns over time, leading to exponential growth.
SIP Returns on Rs 8,00,000
At 8% Interest Rate: Estimated returns of Rs 1,85,757, total value Rs 9,83,757.
At 10% Interest Rate: Estimated returns of Rs 2,40,496, total value Rs 10,38,496.
At 12% Interest Rate: Estimated returns of Rs 2,99,069, total value Rs 10,97,069.
Understanding Fixed Deposit (FD)
FDs are term deposits offering a fixed interest rate for a predetermined tenure, suitable for risk-averse investors.
How FD Works
The principal is locked for a specific period, and returns are calculated upfront, providing stability.
FD Returns on Rs 8,00,000
At 7.5% Interest Rate: Estimated returns of Rs 3,59,958, total value Rs 11,59,958.
SIP vs FD: Return Comparison
SIP: Generates Rs 18,63,509 over 12 years (at an average 12% return).
FD: Offers Rs 11,43,335 after 5 years (at 7.5% return).
SIP vs FD: Which offers better returns?
SIP: Provides higher potential returns but comes with market-linked risks.
FD: Offers guaranteed returns but with lower growth potential.
SIP vs FD: Which offers better returns?
FD: Offers guaranteed returns but with lower growth potential.