SIP vs RD Calculator: Where will Rs 10000 monthly investment create bigger wealth? 10, 15 and 20-year | Explained

SIP vs RD Calculator: For many investors, choosing between a Systematic Investment Plan (SIP) and a Recurring Deposit (RD) is a common dilemma. Both options allow investors to put in a fixed amount every month, but the return potential, risk and final corpus can vary significantly. So if you invest Rs 10,000 every month, which route can help build a bigger corpus over 10, 15 and 20 years? The comparison shows SIPs may generate higher wealth in the long term, while RDs offer stable and guaranteed returns.

What are the key differences between RD and SIP?

An RD is a fixed-income investment offered by banks and post offices, where returns are predetermined and carry minimal risk. SIPs, on the other hand, invest money in mutual funds and are market-linked, meaning returns are not guaranteed and depend on the type of fund chosen. Investors can choose from debt, hybrid or equity mutual funds based on their risk appetite.

While RD investors enjoy certainty, SIP investors get the benefit of market-linked growth and compounding over longer periods. However, SIP returns can fluctuate during market downturns.

How much corpus can Rs 10,000 monthly RD create?

Using an interest rate of 6.05 per cent, similar to rates offered on long-term recurring deposits and fixed deposits, a monthly investment of Rs 10,000 in an RD can create a corpus of about Rs 16.48 lakh in 10 years. For longer durations, the matured RD amount is assumed to be reinvested into an FD while a fresh RD continues.

10 years: Around Rs 16.48 lakh

15 years: Around Rs 29.27 lakh

20 years: Around Rs 46.54 lakh

SIP can create a much bigger corpus?

The final amount in an SIP depends on annual returns. At lower returns of 6 per cent-7 per cent, SIPs may deliver a corpus similar to RDs. But as returns improve, especially in equity mutual funds, the difference becomes significant. According to calculations, a Rs 10,000 monthly SIP earning 12 per cent-13 per cent annualised returns can cross Rs 1 crore in 20 years.

15 years at 10 per cent return - Around Rs 40.16 lakh

15 years at 12 per cent return - Around Rs 47.59 lakh

20 years at 12 per cent return - Around Rs 91.98 lakh

20 years at 13 per cent return - Around Rs 1.03 crore

Which is better between SIP and RD… It depends on your risk appetite and investment horizon. If you want stable, guaranteed returns and safety, an RD may suit you better. But if your goal is long-term wealth creation and beating inflation, SIPs may offer better growth potential, especially for investors with a horizon of more than five years. Experts say younger earners and goal-based investors generally benefit more from SIPs because of compounding and equity exposure.

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)