SIP vs RD: What will be your return in 5 years on monthly investment of Rs 7,500?
Compare SIP and RD returns on a Rs 7,500 monthly investment for 5 years.
A Systematic Investment Plan (SIP) allows you to invest a fixed amount regularly in mutual funds, benefiting from market-linked returns and compounding. On the other hand, a Recurring Deposit (RD) is a fixed-income savings tool where you deposit a set amount monthly at a guaranteed interest rate. Both options help in disciplined savings, but they differ in risk and returns. Explore the potential returns from a Rs 7,500 monthly investment for 5 years.
What is SIP (Systematic Investment Plan)?
SIP is a method of investing in mutual funds where investors commit to investing a fixed amount regularly over time, instead of a one-time bulk investment.
How does SIP work?
The chosen investment amount is automatically debited from your bank account at fixed intervals.
The amount is invested in mutual funds, and units are allocated based on the NAV (Net Asset Value).
Advantages of SIP over lump Sum investment
Enables disciplined savings.
Minimises market timing risk through rupee cost averaging.
Generates compounded returns over time with reinvestment.
Flexibility in SIP
Investors can adjust investment amounts, pause, or discontinue the plan.
Returns can be received at the SIP's tenure or periodically.
SIP: What will be your return in 5 years?
Investing Rs 7,500 monthly in an SIP for 3 years yields a total return of Rs 1,68,648 on an investment of Rs 4,50,000, bringing the maturity value to Rs 6,18,648.
What is RD (Recurring Deposit)?
A National Savings Recurring Deposit (RD) is a secure investment option where individuals deposit a fixed amount monthly and earn interest at a fixed rate.
RD interest rates (From January 2024)
Interest Rate: 6.7% per annum (compounded quarterly).
Minimum deposit: Rs 100 per month (multiples of Rs 10).
RD features and eligibility
Open to individuals, joint accounts, minors, and guardians.
Any number of RD accounts can be opened.
Default, loan and premature closure rules
Defaults: Allowed up to 4 missed payments, with charges applied.
Loan Facility: Up to 50% of the balance after 1 year.
Premature Closure: Allowed after 3 years with reduced interest rates.
RD: What will be your return in 5 years?
Depositing Rs 7,500 monthly in an RD for 3 years earns a return of Rs 85,242 on an investment of Rs 4,50,000, resulting in a total maturity value of Rs 5,35,242.