🧠 FD vs RD vs SIP: Which Investment Is Best for You?
By: Expert Financial Analyst | Niveshnama
✅ Introduction
Choosing between Fixed Deposit (FD), Recurring Deposit (RD), and Systematic Investment Plan (SIP) can feel confusing. Each investment option has its purpose. In this article, we’ll explain:
- What FD, RD, and SIP mean
- How each one works
- Which is best for safety, returns, and long-term goals
- A real case study and comparison chart
🔍 What Is a Fixed Deposit (FD)?
A Fixed Deposit is a one-time investment with a bank for a fixed term at a guaranteed interest rate.
- Lump sum deposit (e.g., ₹1 lakh)
- Return: 6–7.5% annually
- Very low risk, safe and secure
- Interest fully taxable
Example: ₹1,00,000 FD @7% for 5 years grows to ₹1,40,000.
🔍 What Is a Recurring Deposit (RD)?
A Recurring Deposit lets you deposit a fixed amount every month, earning interest like an FD.
- Monthly deposit (e.g., ₹2,000)
- Return: 6–7% annually
- Good for disciplined saving
- Fully taxable interest
Example: ₹2,000/month RD for 5 years @6.5% becomes ~₹1.4 lakhs.
🔍 What Is SIP (Systematic Investment Plan)?
A SIP is a monthly investment in mutual funds (equity or debt), offering long-term market-based returns.
- Invest from ₹500/month
- Returns: 10–15% (equity), 6–8% (debt)
- Market-linked returns, long-term compounding
- Taxed under LTCG/STCG rules
Example: ₹2,000/month SIP for 10 years @12% = ₹4.6 lakhs.
📊 Real Case Study: ₹2,000/month for 10 Years
| Investment | Total Invested | Maturity Value | Gain |
|---|---|---|---|
| SIP @ 12% | ₹2.4 lakh | ₹4.6 lakh | ₹2.2 lakh |
| RD @ 6.5% | ₹2.4 lakh | ₹3.1 lakh | ₹0.7 lakh |
| FD ₹1L @7% | ₹1.0 lakh | ₹1.97 lakh | ₹0.97 lakh |
📈 Investment Growth Chart (10-Year)
🧠 Risk & Return Comparison
| Feature | FD | RD | SIP (Mutual Fund) |
|---|---|---|---|
| Type | Lump sum | Monthly saving | Monthly investment |
| Return | 6–7% | 6–7% | 10–15% (Equity) |
| Risk | Very Low | Very Low | Moderate (Lower Long Term) |
| Liquidity | Low (penalty) | Low (penalty) | High (anytime redeem) |
| Tax | Taxable | Taxable | LTCG @10% over ₹1L |
| Wealth Potential | Limited | Limited | High |
🏁 Final Verdict – Which Should You Choose?
| Goal | Best Option |
|---|---|
| Safe short-term savings | FD or RD |
| Build saving habit | RD |
| Long-term wealth growth | SIP |
| Retirement/child education | SIP |
✅ Conclusion
If your goal is growth and wealth creation, SIP is the best long-term option. For safety and fixed returns, FD and RD are great for conservative savers.