Traditionally, an Indian investor usually prioritize fixed deposits (FD). But Fintech is also turning them towards new investment. Such as mutual funds provide high returns and more control. A systematic investment plan (SIP) gives permission to invest slowly in mutual funds and is a popular option today. A common issue is to decide which option corresponds to their financial goals and risk tolerance.
What is FD
FD is a lump sum investment with fixed deposits, banks or non-banking financial companies (NBFCs). In this, you invest a certain amount for a period from 7 days to 10 years. The bank or NBFC pays a fixed interest rate, which is determined by you on the account opening. This interest rate in FD is guaranteed and there will be no change even if there is a change in market rates. If you invest in tax-saving fixed deposits for at least 5 years, you can get tax benefit, which increases the benefits of FD. The main purpose of fixed deposits is to get returns on it while keeping the capital safe.
What is sip
SIP ie Systematic Investment Plan is a method of systematic investment that allows you to make regular, fixed investment in date or equity mutual funds. SIP investment is perfect for those who are new in the stock market and who do not want to make lump sum investment at once. SIPs are target oriented investment. They help investors to develop disciplined and timely savings habit. If you invest money every month in SIP for a year or more, then you also get a tax benefit on your contribution.
What is more intelligent in investing
First of all, understand that FD is a means of investment while SIP is an investment process. Investment made in SIP equal parts and at regular intervals. According to Tata AIA Life Insurance, comparing these two may be a bit unfair. But it is a fact that many people connect SIPs to mutual funds and use the term almost for each other. Both FD and SIP have their own unique features and benefits. You can choose the best option, according to your investment needs. You can decide yourself about investment by looking at the following things:
- If you are a conservative investor who does not like to risk your hard -earned money, that is, you do not want to take the risk, then you can choose the option of FD. But if you are an aggressive investor i.e. you want high returns and are ready to take high risk from medium on your investment, then you can choose the option of SIP.
- If you want to invest lump sum money, you can invest in FD. If you want to invest small money at regular intervals and do not want to invest a large amount, then you can invest in SIP.
- If the purpose of your investment is capital protection and you do not expect high returns, then FD may be a better investment option for you. If you want to invest target oriented, so that high returns can be found then SIP is a better investment option for you.
- If you have a definite deadline regarding investment, then you can invest money in fixed deposits. If you are not sure of the investment period and your investment is giving appropriate returns, then you want to withdraw money at any time, then you can proceed with SIP.
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