When it comes to investment, most people also consider two popular options – SIPs (Systematic Investment Plan) and FD (Fixed Deposit). Actually both of them come with their advantages and boundaries. There are two types of investors in the market. One who does not want to take a market risk. And the second one who intends to earn more returns with risk. In such a situation, both investment options have their own roles. What is the difference between these two investment options and for whom can be better, here we try to understand it.
What is sip?
SIP means a systematic investment plan is a way in which you invest small amount in mutual funds every month. It is connected to the stock market and has the ability to give better returns over the long term. SIP has many advantages. It provides the benefit of compounding. Return on investment over time also earns returns, causing capital to grow rapidly. Also, units of market fluctuations are available at average cost, which reduces the risk. This is beneficial for long -term goals such as retirement or education of children. Since SIP invests in the stock market through mutual funds, it is somewhat market risk.
What is FD?
FD ie fixed deposits are a traditional and safe investment option, which banks and financial institutions provide. The amount invested in it gets a fixed interest rate and is completely free from market risk until the fixed period. FD has its own advantages. In this, the investor gets a fixed and stable return. The interest rate on FD is pre -determined, so that returns can be predicted. It is suitable for investors who prioritize capital security. Some FDs get tax exemption under Section 80C.
Who to choose from SIP and FD?
According to ICICI Direct, choosing from SIP and FD depends on your financial goals, risk -taking ability and deadline. If you do not want security, stable returns and market risk, fixed deposit is a reliable option. However, if you want to deposit money in the long term and handle market fluctuations, then SIPs prove better. So, SIP or FD, who is better? There is no one answer to this. Ideally, a balanced approach, combining both SIP fixed deposit strategies, can help you take the best advantage of safety and smart investment. Is SIP better than FD? Of course for long periods.
Understand these things before investing:
If you are a conservative investor and do not like to risk your hard earned money, then you choose FD. On the other hand, aggressive investors who want more returns and are willing to take more risk on their investment, can opt for SIP.
If you want to invest outright amount, you can invest in FD. If you want to invest small money at regular intervals and do not want to invest much, then you can invest in SIP.
If your main investment goal is to save capital and you do not expect more returns from it, then you can invest in FD. If you want to invest a goal-oriented, so that you get more returns, then go to SIP.
If you have a certain period of investment in your mind, you can invest in FD scheme. On the other hand, if you do not know about the investment period and you want to withdraw money whenever you are getting proper returns from investment, you can invest in SIP.
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