The investment market in India encompasses a wide range of choices. From beginners to seasoned investors, everyone can find financial products that meet their needs. Two such options that often confuse Indian investors are fixed deposits and systematic investment plans. Read on to get a better idea about their differences to make an informed decision.
What is a fixed deposit (FD)?
FDs are products that allow you to put a lump sum in the account for a tenure of your choice. They are a safe investment option as FD interest rates are not affected by the financial market. You may choose from cumulative and non-cumulative deposits and earn assured returns.
What is a systematic investment plan (SIP)?
SIPs are mutual funds where you can regularly put in a small amount of money each month. The fund managers then invest your capital in debt and equity-based products to generate substantial returns. SIP is suitable for new investors as it helps build good investment habits.
Benefits of FD
- Guaranteed returns on investment
- Risk-free option
- Flexible investment tenure
- You may avail of loans against your Fixed Deposit investments
- Can be used as security when taking a credit card or loan
- Allows overdraft withdrawal and premature account closure in times of emergency
- Five-year tax-saving FDs offers tax exemptions
- The fixed deposit eligibility is flexible as it allows both individual and joint investments
Benefits of SIP
- Allows you to invest every month based on your budget
- SIP’s performance is easy to track
- Experienced fund managers invest in different instruments on your behalf to maximize return
- You may withdraw money from the fund whenever required
Comparison between FD and SIP
You may use SIP mutual fund and fixed deposit calculators online to determine which option is right for you. However, you must also keep the following points in mind before making a decision.
- SIPs allow you to invest a small amount every month while FDs require lump-sum investment.
- The SIP’s performance depends on the financial market situation, which makes it risky. FDs offer fixed interest rates, eliminating any possibility of loss.
Which one to choose?
When it comes to SIP vs. FD, you must consider your requirements. You choose between these two investment products depending on your investment goal and risk appetite.
FDs are comparatively safer than SIPs as they offer assured returns. If you decide to put money in FDs, consider the ones from Mahindra Finance. They offer high interest rates and have an ‘FAAA’ rating from Credit Rating Information Services of India Limited (CRISIL), which means the highest safety. Visit their online portal to start investing today.