Smart Investment | SIP or RD? By investing in which scheme you will get double returns? go into detail
Smart Investment Savings and investments are very important things. Recognizing the needs of customers, banks and financial institutions are constantly announcing attractive savings schemes. The trend towards investment in the stock market is also increasing. Generally, saving in post office and bank schemes is considered safe. Investing in stocks and SIPs is considered relatively risky. Systematic investment plans and recurring deposits are suitable options for savings. What exactly is the difference between these two options? When it comes to saving and investing, returns and money security are the two main things that come to the fore. Today, there are many options available for saving and investing. SIP and RD options are considered relatively better. The question in my mind is which of these options to choose. To get the answer, you need to know the difference between the two. Recurring deposit or RD is a financial instrument provided by banks. In this you can deposit a fixed amount at regular intervals for a fixed period. RD is a safe investment scheme. This is an ideal plan for individuals who want to invest in the short term. SIP is an investment option. On this basis a person can invest a fixed amount in mutual funds at regular intervals. In this you can invest money in the market on monthly or quarterly basis. SIP works like a recurring deposit. A fixed amount is invested regularly over time. An investor can deposit a fixed amount in the bank account linked to RD for a regular period. On the other hand, an investor invests in a mutual fund plan for a fixed period (weekly, monthly or annually). The money invested buys units of the selected fund at the current net asset value, or NAV. RD interest rates are fixed. They usually range between 5% and 9%. For senior citizens, these rates may be slightly higher (half a percentage point). These rates remain fixed for the entire period. SIPs do not guarantee returns. It may fluctuate depending on the mutual fund type chosen (equity or debt) and market conditions; But equity SIP has given returns between 12 to 22 percent in the last five to 10 years. RDs have a fixed maturity period of six months to 10 years. Investors receive the principal amount along with accumulated interest on maturity. There is no such fixed period in SIP. The investor can continue to invest for any desired period to achieve the long-term financial objective. RD offers limited flexibility. However, some banks may offer flexible RDs. Through this, banks sometimes allow missed installments with possible adjustment of interest earned. SIPs are more flexible. Investors can choose between equity or debt funds depending on their risk appetite and financial objectives. They can adjust the amount of contributions or extend a temporary plan to suit changing financial conditions. The interest earned on RD is taxable as per the tax slab of the individual. There are no tax breaks or deductions. Tax depends on the type of capital gains arising from the sale of SIP units (Short-Term Capital Gain (STCG) or Long-Term Capital Gain (LTCG). RD offers moderate liquidity. Although premature withdrawal is allowed, The individual is subject to pre-settlement penalty. This may reduce the total interest. Generally, SIP has more liquidity. Investors can exit the SIP whenever they want. An exit load may be imposed if the units are redeemed before a certain period. RDs are a good option for investors who want a safe investment option with guaranteed returns. Opt for RD. Investors can benefit from the high returns offered by SIP. RD is considered a low-risk investment. The principal amount is completely safe. SIPs involve stock market risk. The risk is particularly high in Equity SIPs. Long-term investing can help smooth out market volatility and reduce potential risks. This may leave you wondering which option to choose. The choice of SIP or RD depends on your financial goals and risk tolerance. SIP can give higher returns than investing in the stock market. But there are risks. RD gives priority to capital protection with guaranteed returns. SIP is a good option for long term wealth accumulation. Because it has the potential to grow. RD is a good option if you want short-term savings or guaranteed, expected returns.
Disclaimer : Investing in mutual funds and stock market is based on risk. Before investing in the stock market, definitely consult your financial advisor. tezzbuzz.com will not be responsible for any financial loss.
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