SIP (systematic investment plan) is the way to invest in mutual funds, where people need to make small deposits at regular intervals. Fixed deposit (FD) is another investment option where people have to deposit a fixed amount and get the lump sum with applicable interest on maturity.
Fixed deposits allow you to invest in a secure account that provides you with a higher rate of interest. It also offers you a 0.50% interest rate for senior citizens.
If you are confused about deciding the best investment option, between the SIP or FD, then this article helps you make the right decision.
What is FD
An FD (fixed deposit) is an investment option that permits people to put in a lump sum for a fixed term. You can get FD services online from banks or non-bank financial companies. Keep in mind that you are unable to break your FD within the tenure.
If you still want to break your FD during the tenure, you must pay your bank some fees. When the FD tenure is complete, the whole invested amount, with interest, is sent to the person's account.
What is SIP
SIP (systematic investment plan) is another option that permits people to put in a small amount of money every month. SIP work like a stepping stone for investors with mutual funds.
SIP also works like a goal-oriented investment. The best thing is that people can easily achieve their objectives and future goals with the help of SIP. You can also use the SIP calculator to know the interest before investing in SIP.
SIP has the Power of compounding: It means Reinvesting the accrued profits, The principal amount is raised as a result of the investment of the interest gained on the principal.
Pros of fixed deposits
Pros of systematic investment plan
Final verdict
SIP and FD both investment options have come with unique benefits for people with different use of SIP and FD. There is some difference between both investment options, FD or SIP. As an investor, you must determine your need first and what exactly you are looking forward to as the future option, analyze all the above facts, and then choose the investment option according to your needs and requirements.