SIP vs. RD: Which one will make you a crorepati faster with a monthly investment of ₹5,000? Understand the full calculation..
If you want to build a substantial corpus for your retirement, you have two options: SIP (Systematic Investment Plan) and RD (Recurring Deposit). Both allow you to invest small amounts on a monthly basis. However, there is a key difference: an RD—held with a bank or post office—offers secure returns at a fixed interest rate, whereas an SIP is linked to mutual funds and has the potential for higher returns based on market performance.
So, the question arises: if you invest ₹5,000 per month, which option will make you a 'crorepati' (millionaire) first—SIP or RD? Let’s look at the calculations.
Which is better: SIP or RD?
SIP: This is a method of investing in mutual funds. SIPs are linked to the stock market and are subject to market fluctuations. Over the long term, they can yield average returns of 12% to 15%.
RD: You can open an RD account with a bank or a post office. The interest rate is fixed, typically ranging from 6% to 7%. The standout feature of this scheme is its safety and security.
SIP Calculation:
If you invest ₹5,000 monthly and earn an average annual return of 15%:
Monthly investment: ₹5,000
Investment tenure: 10 years
Total invested in 10 years: ₹6,00,000
Total amount with 15% return: ₹14,06,298
Total gain: ₹8,06,298
Monthly investment: ₹5,000
Investment tenure: 15 years
Total invested in 15 years: ₹9,00,000
Total amount with 15% return: ₹35,83,724
Total gain: ₹26,83,724
Monthly investment: ₹5,000
Investment tenure: 20 years
Total invested in 20 years: ₹12,00,000
Total amount with 15% return: ₹83,99,112
Total gain: ₹71,99,112
RD Calculation:
If you invest ₹5,000 monthly and earn an average annual return of 7%:
Total invested in 10 years: ₹6,00,000
Total amount with 7% return: ₹8,79,030
Total gain: ₹2,79,030
Total invested in 15 years: ₹9,00,000
Total amount with 7% return: ₹16,22,676
Total gain: ₹7,22,676
Total invested in 20 years: ₹12,00,000
Total amount with 7% return: ₹26,19,446
Total gain: ₹14,19,446 Rupees
What is right for you?
The calculations clearly show that if you want to build a corpus of ₹1 crore through an SIP, you would need to invest ₹5,000 per month for 22 years. In contrast, reaching the ₹1 crore mark via an RD would take more than 35 years. Therefore, if you are looking for a safe investment, an RD is a better choice; otherwise, an SIP offers higher returns.
Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
