Want to save for future needs, but can't decide where to invest the money? In such a situation, SIP of mutual fund and RD of post office are two different options in front of you. In both, a big fund can be created by depositing a small amount every month. But their functioning, earning potential and risks are different. If you invest Rs 10,000 every month, how much will you get in both the options after five years? Let us understand through data.
This much money can be earned by running SIP for 5 years
Instead of investing a large lump sum in mutual funds, regular investments can be made through SIP. In this, the investor decides the monthly amount as per his convenience and continues investing accordingly.
For example, if you invest Rs 10,000 every month, a total of Rs 6 lakh will come out of your pocket in five years. Now suppose that during this period the average annual return on investment is 12 percent. In such a situation, after five years your fund can reach approximately Rs 8.17 lakh. That means, in addition to the invested amount, there can be an increase of around Rs 2.17 lakh.
Keep in mind that the returns received in mutual funds are not pre-determined. Actual earnings may be more or less depending on stock market conditions. In some circumstances you may also have to suffer loss.
Deposit Rs 10,000 every month in post office RD
For people who make regular savings, the post office's five-year recurring deposit or RD is also an option. In this, the investor has to deposit a fixed amount every month. In this scheme, there is no risk associated with the stock market and the money grows according to the interest rate decided by the government.
The interest on five-year post office RD for the quarter October to December 2026 is fixed at 6.7 percent per annum. If you deposit Rs 10,000 every month, a total of Rs 6 lakh will be deposited in five years. Based on the current interest rate, you can get around Rs 7.14 lakh on maturity. In this way, approximately Rs 1.14 lakh will be earned from interest.
SIP Vs RD: What is the difference in returns of both the schemes?
Now if we put both the options together, the picture becomes clear to a great extent. If you invest Rs 10,000 every month for five years, the total investment in both will be Rs 6 lakh. The difference is in the returns received.
Based on 12 percent estimated annual return, the SIP fund can be around Rs 8.17 lakh. At the same time, it is estimated to get around Rs 7.14 lakh from Post Office RD with 6.7 percent interest. According to this, you can get around Rs 1.03 lakh more in SIP. But this difference is possible only when the expected returns are achieved in SIP.
What should you keep in mind before investing money?
Choosing the right investment option depends on your financial needs. If you understand market fluctuations and have the risk appetite, SIP may be an option worth considering for you. On the other hand, people whose priority is regular savings and pre-determined interest can choose Post Office RD.
Before investing in any scheme, be sure to know about its terms, interest rates and possible risks. Investment decisions should not be taken only on the basis of past returns or estimated future profits.