SIP Vs Sukanya Samriddhi Yojana: Rs 5,000 Monthly Investment For 10 Years Compared

Building a corpus fund for the future needs of children requires a well planned investment roadmap. With small investments every month you can build sizable fund to financial secure the future of your children, especially the major expenses like higher education and wedding.

If you are looking forward to building a corpus fund for you girl child, mutual fund Systematic Investment Plans (SIPs) and the government-backed Sukanya Samriddhi Yojana (SSY) could be suitable options. Both the investment instruments offer flexibility, attractive returns and long-term wealth creation opportunity. You can start saving a small amount every month instead of a large lump sum amount through these schemes.

If you are planning to invest Rs 5,000 per month for 10 years, these two options could be suitable. However, you should take into account a few key factors before investing.

In SIPs, you invest a fixed amount in mutual funds at regular intervals, such as monthly or quarterly. Since they are market-linked, SIPs typically offer higher returns over the long term, but they also carry a certain level of risk.

You can diversify your investments through SIPs across debt, equity, bonds, gold and other asset classes. There is no limit on the amount you can invest via SIPs. You can start investing as low as Rs 100 per month.

On the other hand, the SSY is a government-backed small savings scheme for the girl child that offers fixed and tax-free returns. When it comes to the lock-in period, SIPs have no mandatory lock-in unless invested in ELSS.

With SIPs, you can redeem, or pause, your investment anytime. On the other hand SSY comes with a lock-in period of 21 years from the date of the opening of the account. The funds can only be withdrawn for marriage of the girl after turning 18. A partial withdrawal is also allowed for high educations. The maixum investment is capped at Rs 1.5 lakh in a fianncial year.

Under the SSY scheme, investments need to be made for at least 15 years.

Let’s see how a monthly investment of Rs 5,000 for 10 years will grow under both the schemes:

Monthly Investment: Rs 5,000

Tenure: 10 Years

Total Investment: Rs 6 lakh

Estimated Interest Rate: 12% per annum

Expected Returns: Rs 5.61 lakh

Maturity Amount: Rs 11.61 lakh

If you are investing Rs 5,000 per month for 15 years, as mandated under the scheme, the total investment would reach Rs 9 lakh.

The government currently offers an interest rate of 8.2% under the SSY scheme. The amount will mature 21 years after the account opening. The maturity amount would be around Rs 27.73 lakh, resulting in a profit of around Rs 18.73 lakh.

To conclude, SIPs could be a suitable option if you are looking for higher returns with flexibility. On the other hand, for risk-averse investors SSY could be an apt choice due to tax benefits and secure returns.