Business: The hustle of saving one’s earnings is not of today. No matter how much they earn, people definitely think of investing. Because investment is the only method which will be useful in your bad days. When you need money the most, your deposited money helps you a lot. As for how to invest, there are many methods in the market for this. Among them, investing in two RDs and mutual funds is a better way. Let us know which of these investment plans will be right for you.
RD and SIP
RD is an investment in which you deposit a fixed amount every month in the bank or post office. Its interest rate is fixed, so there is no risk in it. On completion of the stipulated time, you get both your deposit amount and the interest earned on it.
At the same time, SIP is a way to invest gradually in mutual funds. In this, you invest a fixed amount every month which is invested in the stock market. There is definitely some risk in this, but in the long run the returns can be higher than RD. This can also be stopped or changed at any time, because there is no strict lock-in period in it. You can earn an average return of 10-15% per annum by taking advantage of market fluctuations, although there is a risk of loss in the short term and the risk in RD is negligible.
Difference between RD and SIP
Investors should be careful while choosing to invest in recurring deposits of banks or post offices and systematic investment plans of mutual funds, as there are major differences between the two. Investing in RD is done through banks or post offices, where fixed and guaranteed returns are available (6% to 7.5% per annum). The risk is very low, but the fixed lock-in period is 6 months to 10 years and there is a penalty for withdrawal before maturity. Also, tax has to be paid on interest, which is suitable for those who want safe and fixed returns.
Whereas SIP is run through mutual funds, where returns are market dependent variables, average 10% to 15% risk in long term, medium to high level of risk, no fixed lock-in but flexible options, easy partial or full withdrawal and LTCG tax applicable after 1 year on Equity SIP. This can prove to be better for those who want to earn more in the long run. Overall, both the schemes have their advantages and disadvantages.
