SIP is In SIP, i.e. Systematic Investment Plan is a way to invest a set amount in a mutual fund scheme. This can also be called systematic investing scheme. The amount is usually invested in an equity mutual funds scheme. SIP is the best way to invest in mutual funds for the first time. Systematic investment schemes offer many benefits for mutual fund investors.
The benefits of SIP: You can learn to manage your money by investing in systematic investment plans. SIPs allow you to invest large amounts for a set period. SIPs and mutual funds can be risky investments. However, high returns are possible. Investors can track their investments easily. You can get tax benefits if you invest in SIP more than one year. Through SIP, you can invest in open-ended funds. You can withdraw or invest money anytime you like.
Fixed Deposit: Fixed deposit can be made in banks, non-banking financial institutions, and post offices. This is where the investor invests a set amount for a specific period. Fixed deposits are a great option if you want to make investments that will provide high returns and security. Non-banking financial institutions and banks offer a variety of fixed deposit options depending on the long-term and short-term needs of investors.
Benefits from Fixed Deposits: Fixed deposits offer many benefits, including high returns and security. Investors have the flexibility to choose the amount and time period that suits their needs. Fixed deposits offer investors flexibility. Investors can quickly close fixed deposits or withdraw funds from fixed deposits in an emergency. An investor who invests in a fixed deposit that is tax-saving for five years will enjoy tax savings.
Differences between FD and SIP
- Return In FD the interest rate is predetermined. However, SIP’s return depends on stock market returns and is not pre-determined. If you invest over the long-term, it is more likely that FD will yield a higher return than SIP. However, SIP does not guarantee returns.
- Investment method A lump sum is paid in FD for a set period, while a monthly predetermined amount is deposited in SIP. Rs. 500 per month can be deposited to SIP.
- Liquidity SIP is a liquid that can be closed at any moment and funds can be withdrawn. Fixed deposits have a fixed term and you receive the principal as well as interest at the end. Fixed deposits can be closed at any time, although you might have to pay fees. You cannot close your fixed deposit that is tax-saving for 5 years before the end of the period.
- Tax: You may be subject to short-term capital gains tax if you sell mutual fund investments before one year. You can also get a tax benefit of 80C by investing in a fixed deposit that is tax-saving for five years.