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SIP VS RD: Where to invest?

Created by : Sharad Kiyal, Financial Planning Advisor, Aviva Life Insurance  | 01 05 2010 10:15:08 +0000
Industry : Private Banking/Wealth ManagementFunctional Area : Personal Finance(Personal Interests)
Keywords : which is a better option nowadays among systematic planning (sip) and recurring deposit(rd).
Activity:  3100 views;  last activity : 07 06 2010 20:18:09 +0000

The way of investing in a SIP & RD are the same, both of them ask for the small investment per month, but still people are in dilemma that whether to choose a RD or SIP. There are different views of different people for both these investment options. So kindly share your views regarding these investment options.

  
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Systemmatic Investment Planning (SIP) Vs Recurring Deposits (RD)
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Top Argument
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Satinder I agree with you, RD is a old method of investment. 

I am assuming that you will get 7% return in RD & 15% in mutual fund.

If you invest Rs. 1 per month then you get Rs 175 in RD & Rs 279 in Mutual fund assuming above return for 10 year

So to get 10 Lakh after 10 years, you should invest 10 Lakh / 175 = 5744
in RD & 10 Lakh / 279 = 3588 in Mutual Fund.

So SIP is better. :)
By Esha Johar, Risk Analyst, Irevna  02 11 2010 13:34:54 +0000
 
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Sip the return potential is higher. Especially the long term, an investment in stocks will definitely be more rewarding. For short term it depends upon the market conditions and risk appetite of the investor, and sip will be riskier.
By Padmanabhan R, Articled / Audit assistant, Finance student  | 02 11 2010 16:18:29 +0000
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To be frank, both have their own pros and cons when it comes to investment. However, it totally depends on the risk appetite the investor is ready to take. RD is compareably better than SIP for an low risk averse investor. And when comes to return, then SIP is a better option (yes with higher risk obviously). However, if its for long term investment like around 5-10 yrs of time frame, then i feel one should go for SIP than RD. ... Thank you, Manish N

Cheers!!
By Manish N Chugh, Officer Trainee, Stock Holding Corporation of India ltd.,  | 02 11 2010 14:22:11 +0000
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SIP

Good to understand...such a simple example...thanks Esha...appreciated
By Nitin M Aras, Head/VP/GM-Tech. Support, ODTIN Food Solutions Pvt Ltd  | 02 11 2010 13:41:11 +0000
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It will depend on the age of the investor, so if he is young without significant liabilities and has some spare cash, he must invest in a SIP in a mutual fund and continue this habit as long as he can to reap the benefits of compounding and rupee cost averaging.
By Anirban Roy, Jobseeker, Jobless  | 02 05 2010 08:03:44 +0000
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RD is a old method for investment, & its also refer as option of our elder's. We have a young blood, appetitie for money & habit of taking risk(always) so why not SIP. mind it
By Satinder Singh, Sociol worker, Society  | 01 09 2010 07:32:23 +0000
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In recurring deposit though the rate and tennure of investment is fixed but the return is very small as compared to the SIP. Reasons not to choose RD are:

1. If we talk about time then investor can make up his/her mind and take out money in 5 years as generally recurring deposit matures in five year, then also the corpus he/she will get will be higher than recurring deposit.

2.If recurring deposit matures then one has to take out the money and again have to start with a new recurring deposit but in SIP the tennure can be extended so this time to time taking new recurring deposits will not be there.

3.In recurring deposit the choices are very less either post office or banks are doing RD account where as there is large option in the market for the SIP as various companies are there in various sectors of market so investor has a large option to choose.
By Sharad Kiyal, Financial Planning Advisor, Aviva Life Insurance  | 01 07 2010 03:04:29 +0000
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If a person is able to take high risk and seeking a higher return then I would suggest that one should opt for the systemmatic investment planning so that over a time his small savings will grow into big amount.
By Sharad Kiyal, Financial Planning Advisor, Aviva Life Insurance  | 01 05 2010 10:15:08 +0000
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I'll go for RD since here an investor deposits a fixed amount of money every month for a fixed tenure and is easy for investors who want to deposit a fixed amount every month, in order to get a lump sum after some years. The small monthly savings in the Recurring Deposit scheme enables us to accumulate a handsome amount on maturity. Interest at term deposit rates is computable on quarterly compounded basis.
By Rashmi Patil, Financial services  | 01 06 2010 13:49:42 +0000
Argue for "Systemmatic Investment Planning (SIP)"
Argue for "Recurring Deposits (RD)"
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