RD vs SIP: How would it be better to invest in SIP instead of RD? understand math

Investment Planning: With high inflation and rising interest rates, many investment options have come to the fore. Right now most people invest in RD Scheme, which gives good returns after five years of depositing money every month. This is a better option for low-risk investors, but if you can take risk and want to create more funds, Systematic Investment Plan (SIP) from Stock Market can be better for you.

In recent years, the number of people investing in SIP has increased. Rs 13041 crore was invested through SIP in the month of October, which is the highest ever in FY2023. Let us know in which you should plan to invest in RD or SIP.

RD Scheme or SIP
Recurring Deposits is a government investment scheme, which gives guaranteed returns to the investors. Along with this, tax exemption and other benefits are given in it. Whereas SIP comes under Mutual Fund and can be systematically invested in it every month or at a time interval.

what are the two things in common
RD schemes and SIPs can be invested on monthly or quarterly basis and their maturity is for five years. Apart from this, both these schemes can be stopped anytime and the money can be returned to the investors under certain conditions. If regular investments are not made in it, the account may freeze at any time and the investments may have to be started again.

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In which to invest better
An investor can invest in RD scheme at an annual interest of 5.8 to 7 percent without risk. While investing in mutual funds through SIP can earn an average interest of 12 per cent. However, if the market conditions are good, then you can also get 15 to 18 percent interest in the long term. Long term investment in mutual funds is good because compound interest is given on it.

understand by example
If you are depositing 5 thousand rupees every month in mutual funds through RD and SIP, then a total of 3 lakh rupees will be deposited in five years. In RD, at the maximum interest of 7 percent, only Rs 59,663 will be deposited as interest, that is, the total maturity amount will be Rs 3 lakh 59 thousand 663. While in the case of SIP, the interest on the average return of 12 percent will be Rs 1 lakh 12 thousand 432 and the total amount will be Rs 4,12,432.

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