SIP vs RD: If you are planning to invest a small amount for the next 5 years, then you have many options available. RD i.e. Recurring Deposit and SIP are also two different options for investment. In both these schemes, you have to invest a fixed amount every month. On one hand, in RD you get fixed returns and there is no risk in it. On the other hand, the returns received in SIP are never fixed and there is also stock market risk in it. Here we will know where you will get more returns by investing Rs 5000 for 5 years.
How much interest will you get on depositing Rs 5,000 in RD for 5 years?
If you want to open an RD account, then RD account can be opened in any bank or post office of the country. The post office is giving 6.7 percent annual interest on 5 year RD. If you make an RD of Rs 5000 every month in the post office, then in 5 years your total investment will be Rs 3,00,000. According to the interest rate of 6.7 percent, after 5 years you will get a total fixed amount of Rs 3,56,830. This includes interest of Rs 56,830.
How much return will you get from SIP of Rs 5,000 every month for 5 years?
On the other hand, if you do a SIP of Rs 5000 for 5 years, then here also your total investment will be Rs 3,00,000. If you get an estimated return of 12 percent every year, then after 5 years you can create a total fund of Rs 4,12,432. This also includes your return of Rs 1,12,432. That means the return in SIP is almost double that of RD. Apart from this, you also get the benefit of compounding in SIP.