SIP vs RD: Which One Gives More Returns on Investing ₹10,000 Per Month?

G GOWTHAM
If you are planning to invest ₹10,000 every month, two popular options often come up—SIP (Systematic Investment Plan) and RD (Recurring Deposit). Both encourage disciplined savings, but they differ significantly in risk, returns, and wealth-building potential.

Let’s compare them in detail.

What Is SIP?

A Systematic Investment Plan (SIP) allows you to invest a fixed amount every month in mutual funds—usually equity, debt, or hybrid funds.

Key Features:

  • Invest in market-linked instruments
  • Potential for higher long-term returns
  • Power of compounding
  • Flexible (can increase, decrease, or stop anytime)
  • Suitable for long-term wealth creation
Returns depend on market performance, especially if invested in equity mutual funds.

What Is RD?

A Recurring Deposit (RD) is a fixed-income investment offered by banks and post offices.

Key Features:

  • Fixed monthly investment
  • Guaranteed returns
  • Fixed interest rate (decided by the bank)
  • Low risk
  • Ideal for short- to medium-term goals
Interest rates typically range between 6% and 8%, depending on the bank and tenure.

Returns Comparison: ₹10,000 Per Month for 5 Years

Let’s compare both assuming a 5-year investment period.

1️⃣ RD Calculation (Assuming 7% Annual Interest)

  • Monthly investment: ₹10,000
  • Total investment: ₹6,00,000
  • Estimated maturity value: ~₹7,10,000
  • Approximate gain: ₹1,10,000
Returns are fixed and predictable.

2️⃣ SIP Calculation (Assuming 12% Annual Return in Equity Fund)

  • Monthly investment: ₹10,000
  • Total investment: ₹6,00,000
  • Estimated value after 5 years: ~₹8,25,000
  • Approximate gain: ₹2,25,000
This shows significantly higher potential returns—but remember, SIP returns are not guaranteed.

Risk Factor: Stability vs Growth

Factor

SIP

RD

Risk

Market-linked (Moderate to High)

Very Low

Returns

Potentially High

Fixed & Stable

Liquidity

High (subject to exit load)

Limited (penalty for premature withdrawal)

Best For

Long-term wealth creation

Safe short-term savings

Taxation Difference

SIP (Equity Funds):

  • Long-Term capital Gains (above ₹1 lakh): 10%
  • Short-Term capital Gains: 15%
RD:

  • Interest is fully taxable as per your income tax slab.
  • TDS may apply if interest exceeds the prescribed limit.
This taxation difference can further impact actual returns.

Who Should Choose SIP?

  • Investors with long-term goals (5+ years)
  • Individuals comfortable with market fluctuations
  • Those aiming for wealth creation
  • Young earners building retirement or large future corpus
Who Should Choose RD?

  • Risk-averse investors
  • People saving for short-term goals (1–3 years)
  • Those who want guaranteed returns
  • Senior citizens preferring stability
Final Verdict: Which Gives More Returns?

If your goal is higher returns over the long term, SIP generally outperforms RD due to market-linked growth and compounding benefits.

If your goal is capital safety and assured returns, RD is the better option.

Smart Strategy Tip:

Many financial planners suggest combining both:

  • Use RD for emergency or short-term goals.
  • Use SIP for long-term wealth creation.
Conclusion

Investing ₹10,000 per month can build a significant corpus over time. The choice between SIP and RD depends on:

  • Your risk appetite
  • Investment horizon
  • Financial goals
For long-term growth, SIP usually delivers higher returns. For guaranteed safety, RD remains a reliable choice.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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