SIP vs FD: Which Investment You Should Go With

SIP vs FD, if I ask you which one is better someone will say FD is better and someone will say SIP is better. No problem you will get the guaranteed answer to this question before the article ends which one is better for you whether it is SIP or FD?

Things to keep in mind (SIP vs FD)?

  1. Whether you invest in SIP or FD you should focus on the long term.
  2. Have patience great things take time. It is not Maggie that will be ready in 2 minutes. Fact although Maggie takes more than 2 minutes 😹
  3. Don’t put money anywhere without anyone’s recommendation
  4. Don’t blindly trust anyone do your own research before putting money anywhere because it is your hard-earned money hope you will understand
  5. 3 things to do before investing (make sure you had done)

What is SIP?

SIP stands for Systematic Investment Plan. Basically, as the name suggests systematic means system one has to follow a system to regularly invest fixed amount of money in the stock market. Whether they can invest money directly in stocks or with the help of a mutual fund.

SIP helps people to maintain their discipline in investing and if you are a beginner you can start with a systematic investment plan which will help you to be disciplined with your money and meet your financial goal. If you are looking for a long-term investment option you can go with SIP.

What are the advantages of SIP?

There are lots of advantages of SIP sum of them are listed below:-

  1. One can do a SIP according to their need, it is not compulsory for everyone to do the same amount of SIP.
  2. The best part of SIP is that you can start with Rs 100 yes. There is a good opportunity if you have a low amount of money then also you can start investing in SIP.
  3. When you talk about the SIP the first thing that comes to our mind is high returns. One can get 12 – 15% easily if you have proper knowledge.
  4. If you look for a long-term investment you can get a very good amount of tax benefit while doing SIP.
  5. One can check their check investment without any headache in one click.

What are the disadvantages of SIP?

There are a good amount of advantages of a SIP but there are some disadvantage of SIP which you can go through:-

  1. There is a risk in doing SIP because one invests money in a market that is stock market that’s why volatility is the reason for risk.
  2. SIP can be for that person who has regular cash flow and it will be hard for you to follow SIP if you lack financial stability.
  3. If you have a fixed amount of SIP then you have to continue with that because no matter what the market currently is you can’t change it once you start doing the SIP. So calculate before investing properly.
  4. Returns may increase or decrease due to volatility in the stock market.
  5. SIP is not a quick rich scheme we need to give time so if you want to see your wealth grow you need to give time.

What is FD?

FD stands for fixed deposits. In FD one has to pay a lumpsum amount of money to the bank or NBFC. NBFC is non banking financial companies. So that after a certain amount of duration, you will get a particular amount of return in your lumpsum amount. The best part of FD is that you know how much return you will get in the future because the returns are predefined before you do that FD. So you can easily calculate that how much your money will be after 5 years or 10 years of maturity.

What are the advantages of FD?

Let’s quickly look at the quick advantage of FD:-

  1. It is easily available in any bank one can do FD without any headache there are some banks where FD is done automatically so that they don’t have to do it manually.
  2. FD provides you with a fixed amount of return so that you know how much your wealth will be growing in upcoming future.
  3. You can say that it is risk-free. Although it is not if you are a beginner and you want to play safe then you can say.
  4. The benefit of FD is that you can get a loan against your FD.
  5. If you do over 5 years then you can avail tax benefits.

What are the disadvantages of FD?

Some of the disadvantages of FD are as follows:-

  1. There is a risk that it provides very low returns.Yes that’s why I told you above that all the people think that it is risky but it isn’t like that.
  2. You can’t beat the inflation after deducting the tax at the end.
  3. When you talk about the liquidity in FD. One can find it difficult. It may take some time to complete the process so that you can get your money in your hands.
  4. Maturity in FD will take time and the worst part of this is that after waiting for years then also you get hardly any return on your FD. So you will not be wowed after looking at the maturity of your FD.

SIP vs FD Comparisons

Sr NoFactorSIPFD
1.Investment AmountInstallmentLumpsum
2.Nature of ReturnCapital gain and DividendInterest
3.LiquidityHighLow/Medium
4.TaxSTCG – 15%
LTCG – 10%
10% TDS (above 40K Rs)
5.For whomAttacking PlayersDefensive Players
6.Returns OfferedNot GuaranteedGuaranteed
SIP vs FD

If you look at the above table you will find lots of differences between both of the investment options. There is a high probability you are also fd lover. Because it was more practiced since the past. One can call that fd is a traditional approach to managing financial goals. Anyways one can get benefits in both options but results can vary depending on the investment option you choose.

To get a better idea of which will be good for you one should choose the investment option according to their financial goals and risk appetite. Risk appetite is something that can help you in a better way to distinguish between SIP vs FD. If your risk appetite is low then I am sure that you will definitely go with fd but if you have a medium or high risk appetite then you may go with SIP for investing purposes.

SIP vs FD
SIP vs FD

Is SIP better than FD?

Honestly speaking yes it is true SIP is much much better than FD. Because when you look at the FD and after deducting tax you get hardly around 2 to 3% or let’s say 4% and when you look up to the inflation which is around 6%. So after calculating everything you get -2% return on your investment. And when you look at the SIP it can give you a return of around 12%- 14%.

But the conclusion is SIP is much better than FD considering for investment purposes. However, if you want to put your emergency fund you can go with FD for safety purposes it is a good option. Finally in the end, if you look for investing purposes SIP is a much better option than FD and if you look for emergency funds then you can go with FD.

Which Investment option you should go with?

If you want to grow your wealth and if you are looking for longer horizon then you should go with a SIP. If you are at the age of 20,30 if you have the courage and if you are in your 40s than also you can go with SIP. But if you want to play safe, if you want to protect your money, if you are happy with that 3 – 4% interest then you can go with FD.

Final Call

I hope now you have a clear picture of what is SIP, the advantages and disadvantages of SIP what is FD, and all those things. So I highly recommend you that do your own analysis before putting money anywhere whether it is SIP or FD.

FAQ’s

Is FD taxable?

Yes FD are taxable.

Is SIP taxable?

Yes in short-term capital gain, one has to pay 15% and 10% in long-term capital gain.

It is safe to invest in FD?

It is said to be safe but it is not seriously speaking after calculating each and everything.

It is safe to invest in SIP?

Yes if you have ample of knowledge about SIP it is safe and if you don’t have any knowledge then it might be risky for you.

Can anyone invest in SIP?

Yes anyone can invest money in SIP bit the condition is to do homework before investing money.

I am a beginner can I invest in SIP?

Yes, you can learn about SIP and investing and you are ready to go.

Thank you for reading I hope you like the post SIP vs FD: Which Investment You Should Go With. Comment below if you are looking for more articles regarding personal finance. I will try to write a detailed article on that.

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