SIP vs RD: What will be your return in 5 years on monthly investment of Rs 5,500?

Recurring Deposit (RD)

Interest Rate

Current interest rate: 6.7% per annum (quarterly compounded) (effective from January 1, 2024).

Investment Details

• Monthly deposit: Rs 5,500
• Total invested amount in 5 years: Rs 3,30,000
• Estimated returns: Rs 62,509
• Total maturity value: Rs 3,92,509

Eligibility to Open Account

Individuals, joint accounts (up to 3 adults), guardians for minors or persons of unsound mind, and minors above 10 years.

Deposit Rules

• Minimum: Rs 100 per month, multiples of Rs 10.
• Default penalty: Rs 1 per Rs 100 denomination for missed deposits.

Premature Closure

• Allowed after 3 years, subject to terms.
• Premature closure interest: PO Savings Account rate.

Loan Facility

• Loans up to 50% of account balance after 12 deposits.
• Interest rate: RD interest rate + 2%.

Systematic Investment Plan (SIP)

Investment Mechanism

Fixed monthly investments in mutual funds.
Auto-debit from bank account ensures systematic investing.

Returns and Compounding

• Benefit from market-linked returns and compounding.
• Additional units added with each investment.

Investment Details

• Monthly investment: Rs 5,500
• Total invested amount in 5 years: Rs 3,30,000
• Estimated returns: Rs 1,23,675
• Total maturity value: Rs 4,53,675

When to Start SIP

• Start anytime for long-term goals.
• Early investments maximize returns through compounding.

SIP vs RD

• RD offers guaranteed returns but lower maturity value (Rs 3,92,509).
• SIP has higher risk but potentially higher returns (Rs 4,53,675) through market performance.
• Choose based on risk appetite and financial goals.