SIP vs RD vs FD
Where should a salaried professional invest their monthly savings?
| Feature | SIP (Equity MF) | RD | FD |
|---|---|---|---|
| Expected Returns | 10-14% p.a. (historical) | 6-7% p.a. | 6.5-8% p.a. |
| Returns Type | Market-linked, variable | Guaranteed | Guaranteed |
| Liquidity | Anytime (no lock-in) | Premature with penalty | Premature with penalty |
| Tax | LTCG 12.5% after 1 yr | As per slab rate | As per slab rate |
| Ideal tenure | 5 years+ | 6 months–5 years | 1–10 years |
| Rs 5,000/month for 10 years | ~Rs 11-13 lakhs | ~Rs 8.3 lakhs | ~Rs 8.5 lakhs (lumpsum) |
✅ Bottom line
For goals 5+ years away, SIP in equity mutual funds wins convincingly on returns. For goals under 3 years (vacation, car down payment, wedding), RD or FD wins because capital is guaranteed. The optimal strategy: RD/FD for short goals, SIP for long goals.
The tax difference matters
RD and FD interest is taxed at your slab rate. In the 30% slab, you keep only 70% of returns. SIP in equity funds is taxed at 12.5% for long-term gains above Rs 1 lakh — significantly more tax-efficient for investors in higher slabs.
The volatility trade-off
SIP returns are not guaranteed. In any 1-2 year window, you could be down 20-30%. This is psychologically hard for most people. The solution: only put money in SIP that you will not need for 5+ years. Never SIP for goals with a 2-year horizon.
Run the numbers for your situation
Use our free calculators to see exactly how these options compare with your actual income and investment amount.
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