Where To Invest Money - SIP vs Recurring Deposit?
Systematic Investment Plan (SIP) is a monthly investment in Mutual Funds while Recurring Deposit (RD) is a type of bank deposit. However, there are some basic differences between SIP and RD which one needs to understand before investing.
|Investment||One can invest in mutual funds through SIP which can be weekly, monthly or quarterly.||RD is like a fixed deposit account where one can make monthly investments.|
|Investment Scheme||An investor has an option to decide on the equity or debt scheme, depending on his risk appetite.||An investor has only one choice of the scheme - to invest in a deposit with fixed rate of return.|
|Returns||The returns in SIP depend on the performance of the equity or debt market. |
Usually, SIP gives returns of 12-15%.
|The returns in RD are fixed and are known to an investor at the time of starting RD. Usually, the returns in RD ranges between 7.1-8.5%.|
|Risk||As the returns in SIP depend on market performance, SIP carries some risk. However, research suggests that SIP has given positive returns over a longer period of time.||RD is completely risk-free as the rate of returns are fixed.|
|Liquidity||SIP is a very liquid investment. One can close the SIP and withdraw money anytime without bearing any exit load.||Though RD is liquid, pre-mature withdrawal charges may be applicable.|