Quick comparison
| SIP (equity mutual fund) | FD / RD | |
|---|---|---|
| Returns | Market-linked, not guaranteed | Fixed and known in advance |
| Risk | Can fall in the short term | Very low; bank deposits are insured up to ₹5 lakh per bank |
| Best horizon | 5 years and more | Up to 3 to 5 years |
| Liquidity | Redeem on any working day (except ELSS lock-in) | Penalty on early withdrawal |
| Tax | Capital gains tax rules apply | Interest taxed at your slab rate |
Example: ₹10,000 a month for 15 years
| Option | Amount invested | Approximate value |
|---|---|---|
| RD at 7% | ₹18,00,000 | ₹31.8 lakh |
| SIP at 10% | ₹18,00,000 | ₹41.8 lakh |
| SIP at 12% | ₹18,00,000 | ₹50.5 lakh |
Over long periods, equity SIPs have historically had the potential to grow wealth faster, but with ups and downs along the way. Deposits are steadier but may barely beat inflation after tax.
Which should you choose?
- Emergency fund or a goal within 3 years: FD, RD or a liquid fund
- Goals 5 years or more away (education, retirement, home): equity or hybrid SIP
- Want both: split monthly savings between a SIP and an RD
Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not indicative of future returns.
Frequently asked questions
For long-term goals, SIPs have the potential for higher returns but carry market risk. FDs are better for short-term goals and money you can't afford to see fall in value.