When it comes to choosing where to invest, fixed deposits (FDs) and Systematic Investment Plans (SIPs) in mutual funds remain two of the most widely considered options in India. Each comes with its own set of benefits, and the right choice often depends on your financial goals, risk appetite and investment horizon.
Fixed deposits have long been seen as a safe and predictable option. You invest a lump sum for a fixed period, and in return, you earn a pre-decided interest rate. There's little to no risk involved, and the returns are known in advance. This makes FDs especially appealing to conservative investors who prioritise capital protection over high returns.
FD returns are generally modest, typically ranging between 6% and 7% annually for medium- to long-term tenures. Over time, inflation can eat into these earnings, reducing the real value of your returns. In simple terms, while your money grows, its purchasing power may not increase as much as you expect.
ALSO READ | Rs 6,000 SIP: Can It Make You A Crorepati Before 50?
Mutual fund SIPs, on the other hand, offer a different approach. Instead of investing a lump sum, you contribute a fixed amount regularly, usually monthly, into market-linked funds. Over the long term, these investments have the potential to deliver higher returns, often in the range of 12% to 15% annually, depending on market conditions and fund performance.
That said, higher returns come with higher risk. Since mutual funds are linked to market movements, returns are not guaranteed and can fluctuate in the short term. This means investors need to stay invested for longer periods and be comfortable with some level of volatility.
Rs 10 Lakh FD vs Mutual Fund: Where Can Wealth Grow More In 10 Years
FD Calculation
- Tenure: 10 years
- Total Investment: Rs 10 lakh
- Returns: 6.5% per annum (assumption)
- Interest Earned: Rs 9,05,559
- Final corpus: Rs 19,05,559
Mutual Fund Calculation
- Tenure: 10 years
- Total Investment: Rs 10 Lakh
- Returns: 12% per annum (assumption)
- Interest Earned: Rs 21,05,848
- Final corpus: Rs 31,05,848
As the above calculation shows, SIPs are better alternatives than FDs, but they come with market risks. They are ideal for those with a long investment horizon and some degree of risk appetite.
Also Read | Rs 3 Lakh Lump Sum Vs Rs 15,000 SIP: What Reaches Rs 1 Crore Faster
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
