These days, there are numerous investment methods. Others are willing to assume some risk, in contrast to others who would only invest in choices that guarantee a return. In India, Systematic Investment Plans and Recurring Deposits are two common strategies for building wealth over an extended period of time.
SIP includes setting up a preset sum at regular intervals for mutual fund investments, whereas RD is a savings plan that requires monthly contributions.
Both Recurring Deposits and Systematic Investment Plans are options for those wishing to accumulate a sizeable corpus through regular payments. (Also Read: Here’s how you can get cheap loans easily, know details)
The mutual fund type one chooses as well as the state of the market as a whole will affect the risks involved with SIPs. However, by making investments over a longer time frame, one might avoid such risks whereas Recurring Deposits are one of the safest options for investment. Practically, there is no risk involved in it.
It is widely known that SIPs, like RDs, can be started with as little as Rs 500. The SIP, however, offers a far better return.
An investment made for five years will typically yield a return of about 5.8%. SIP, on the other hand, offers an average return of 12%, with the potential to go to 15%, 18%, or even more if you're lucky. You will additionally gain from compounding.
If you invest Rs 5,000 each month for five years, the total return on your investment will be Rs 48,740, according to the Post Office RD Calculator (with monthly compounding frequency). Therefore, you will receive a total of Rs 3,48,740 after five years.
The typical return in the case of SIP would be 12%. In light of this, your investment would have generated a total return of 1,12,432. As a result, you will receive Rs. 4,12,432 after five years. This might be substantially greater if your SIP generates a return of 15% or more.
