Many times, before investing, people wonder where to invest their money. Actually, there are many investment options available in the market. In such a situation, people are not able to understand what is better for them. If you are also stuck in similar thinking and are not able to choose between SIP (Systematic Investment Plan) or FD (Fixed Deposit), then the news is for you only. In this news, we will compare between SIP and FD, so that you can take a better decision while investing your money.
First understand SIP
SIP is an investment plan in which you invest a fixed amount regularly in a mutual fund. This is a disciplined method, in which you invest a fixed amount every month. By investing regularly in SIP you get good returns. Especially when you invest long term in it. Apart from this, you can also start SIP with small investment. That means you can start SIP with just Rs 500. These are the benefits of SIP, now know about its disadvantages.
Disadvantages of SIP
Actually, the performance of SIP completely depends on the stock market. If the market declines, the value of your investment may reduce. Especially if you want to earn good money in short term, then you will not get much benefit from SIP.
Now understand about FD
FD i.e. Fixed Deposit is a traditional and safe investment option. In this, you deposit a fixed amount in the bank and you get a fixed interest rate on it. FD investment is risk free and your money remains safe. That is, unlike SIP, it is not affected by market fluctuations. The most important thing is that the interest rate in FD is determined in advance and it remains constant during the entire period. That means there is no change in your returns and you always get them. Apart from this, you can decide the time limit of FD yourself. That means you can choose as per your convenience. This time frame can range from a few months to a few years. The biggest thing is that the bank has trust in it.
Now understand the disadvantages of FD
The biggest disadvantage of FD is the returns received on it. Actually, it is limited. The returns of FD are very low compared to the stock market or other investment schemes. Understand this that the benefit of compounding in FD is limited, especially when you withdraw the interest monthly or annually. Because of this your total returns may be limited. Apart from this, a penalty may have to be paid if the amount invested in FD is withdrawn before the stipulated period. Whereas, there is nothing like this with SIP.
After understanding both the investment options, now it is your decision where you should invest. However, our advice is that before investing anywhere, definitely take advice on this from a good and knowledgeable financial advisor.
Also read: How can you earn huge profits by investing in mutual funds, what is the complete process of investing?
