SIP or FD: Which Investment Yields Better Returns on Rs 60,000 After 12 Years?

When considering an investment of Rs 6,00,000, it’s important to compare the potential returns from a Systematic Investment Plan (SIP) and a Fixed Deposit (FD). SIP provides growth linked to the market and benefits from compounding, making it suitable for long-term investors who are open to taking some risks. In contrast, FD guarantees returns, offering stability and security for those who prefer a safer investment. This comparison outlines the expected returns from both options, aiding you in making a well-informed choice that aligns with your financial objectives and risk tolerance.

Systematic Investment Plan (SIP)

SIP involves making regular investments in mutual funds rather than putting in a one-time lump sum.

How it works: The investment amount is automatically deducted from your bank account and invested in mutual funds based on their Net Asset Value (NAV).

Compounding Effect: With each investment, additional units are purchased, which leads to larger reinvestments and higher returns over time.

Flexibility in Return: Investors have the option to receive returns periodically or at the end of the SIP tenure.

Return After 12 Years: If you invest a total of Rs 6,00,000, the estimated returns would be Rs 12,63,509, bringing the total value of your investment to Rs 18,63,509.

Fixed Deposit (FD)

FD is a secure term deposit that comes with a fixed interest rate and a specific duration. 

How it works: The principal amount you invest is locked for a set period, and the returns are calculated in advance, ensuring you know exactly what you’ll earn.

For example, if you invest a total of Rs 6,00,000 at an interest rate of 6.5% for 5 years, your estimated returns would be Rs 5,43,335. This means the total value of your investment after 5 years would be Rs 11,43,335.

In comparison, over 12 years, a SIP can yield Rs 18,63,509, which is significantly higher than the Rs 11,43,335 you would get from an FD after 5 years.

SIP (Systematic Investment Plan) offers the possibility of higher returns, but it also involves market risks that can affect your investment. In contrast, a Fixed Deposit (FD) is a safer investment option, providing guaranteed returns, although they tend to be lower compared to what you might earn through SIP. Choosing between the two depends on your risk tolerance and financial goals.

(Disclaimer: This is not investment advice. Please conduct your own research or consult a financial expert for planning.)