A Rs 10,000 monthly SIP and a Rs 10 lakh fixed deposit (FD) represent two different approaches to investing. One requires investors to build a disciplined investment plan by contributing Rs 10,000 per month into mutual funds. On the other hand, FDs are designed for conservative investors who want their money to keep growing while earning guaranteed returns.
A Rs 10 lakh FD involves investing a lump sum with a bank or financial institution. An investor will be asked to deposit the money for a predetermined tenure and interest rate.
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FDs are considered safer than mutual funds as they are not market linked and offer guaranteed returns. Mutual funds are risky, but come with the possibility of higher returns than most FDs in favorable market conditions.
While an SIP is generally associated with long-term wealth creation and market exposure, FDs are designed for both longer and shorter durations with most banks offering tenures up to 10 years. However, high rates are offered on FDs around 4-5 years, making this a preferable investment duration.
Rs 10,000 SIP Over 15 Years
- SIP amount: Rs 10,000
- Investment duration: 15 year
- Expected rate of return: 12%
- Invested amount: Rs 18,00,000
- Estimated returns: Rs 32,45,759
- Total value: Rs 50,45,759
Rs 10 Lakh FD Over 15 Years
- Amount: Rs 10 lakh
- Duration: 15 years
- Returns: 6.5% p.a.
- Estimated return: Rs 16.3 lakh
- Total value: Rs 26.30 lakh
As seen from the calculations, Rs 10,000 per month SIP has the ability to generate higher over 15 years compared with Rs 10 lakh FD. Here, investors must also note that the investment amount in the SIP is much higher.
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With SIPs, investors have a chance to build a larger corpus, without the investment affecting their lifestyle too much. With FDs, they can be sure that their income will be predictable. Overall, choosing between the two options boils down to the financial goals of the investors and their risk appetite.
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