SIP vs RD- If you want to earn big returns by making small savings, then you have two options. First- SIP i.e. Systematic Investment Plan and second RD i.e. Recurring Deposit . In both you can invest small amounts every month. The only difference is that RD gives safe returns on fixed interest in bank or post office.
Whereas SIP is linked to mutual funds and can also give more profit according to the market. But now the question is that if you deposit Rs 5000 every month, then who will make you a millionaire first? So let’s understand the complete calculation.
Which is better among SIP and RD?
SIP: This is a way of investing in mutual funds. Since it is linked to the stock market, it fluctuates. In the long run, you can get an average return of 12% to 15%.
RD: It is opened in a bank or post office . The interest rate is fixed. Usually, it gives 6-7% interest. The special thing is that it is safe. But it gives higher returns than SIP.
Calculation of SIP:
If you deposit Rs 5,000 every month, which gives you an average annual return of 15%:
Deposit in 10 years – Rs 6,00,000
Total amount with 15% return – Rs 14,06,298
How much profit- Rs 8,06,298
Deposit in 15 years – Rs 9,00,000
Total amount with 15% return – Rs 35,83,724
How much profit- Rs 26,83,724
Deposit in 20 years – Rs 12,00,000
Total amount with 15% return – Rs 83,99,112
How much profit- Rs 71,99,112
So you will become a millionaire in 22 years
That is, if you want to create a fund of Rs 1 crore, then you will have to deposit Rs 5000 every month for 22 years. In which you will have a total investment of Rs 13,20,000. In which you will get Rs 1,05,19,631. Your profit in this will be Rs 91,99,631.
Calculation of RD
If you deposit Rs 5,000 every month, which gives you an average annual return of 7%:
Deposit in 10 years – Rs 6,00,000 lakh
Total amount with 7% return – Rs 8,79,030
How much profit- 2,79,030
Deposit in 15 years- Rs 9,00,000 lakh
Total amount with 7% return – Rs 16,22,676
How much profit- Rs 7,22,676
Deposit in 20 years – Rs 12,00,000 lakh
Total amount with 7% return – Rs 26,19,446
How much profit- Rs 14,19,446
So it will take 35.5 years to become a millionaire!
That is, if you want to create a fund of Rs 1 crore from RD, then you will have to deposit Rs 5000 every month for 35 years and 5 months. During this time, you will deposit Rs 21 lakh 30 thousand. And you will get a return fund of Rs 1 crore 5 thousand. In which you will have a profit of Rs 78,75,000.
What do the experts advise?
Experts say that the risk in SIP is a little higher, but the returns are better in the long run. On the other hand, RD is completely safe, but the interest rate in it is limited. Therefore, experts advise that the sooner you start investing, the sooner you will become a millionaire.
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