Post Office RD vs SIP: Investment always creates wealth in the long term. There are many investment options for the long term depending on the risk appetite.
If you want to invest regularly without taking market risk, then Post Office Recurring Deposit (Post Office RD) is a better option. On the other hand, if you can take market risk directly or indirectly, then Systematic Investment Plan (SIP) can be a good option for investment. You will have fixed income on maturity in Post Office RD. Its interest rates are already fixed. There is no market risk in this. On the other hand, there is market risk in Mutual Fund SIP, but the returns are very attractive.
Post Office RD: ₹ 100 monthly investment
Investment in Post Office Recurring Deposit (PORD) can be started from 1,000 months. There is no maximum limit for investment in this. Right now 5.8 percent interest is being received on the RD of the post office. In this compounding of interest is done on quarterly basis.
Suppose, you are investing Rs 500 every month in post office RD, then after five years you will get Rs 69,694 on maturity. Your total investment in this will be Rs 60,000 and you will get Rs 9,694 as interest income. Similarly, if you deposit Rs 5,000 monthly, then in 5 years you will get Rs 3,48,480. Your investment will be Rs 3 lakh in this and there will be a wealth gain of Rs 48,480.
SIP: ₹1,000 monthly investment
If you have the ability to take market risk, then you can choose the option of investing in mutual funds. Investment in mutual fund schemes can be started with a SIP of Rs 1,000. The average return of most of the schemes in the long term has been 12% per annum.
Suppose, you can start a monthly SIP of Rs 1,000 in a mutual fund. If there is an average annual return of 12%, then after 5 years you can get Rs 82,486. Your investment in this will be Rs 60,000 and wealth gain of Rs 22,486. Similarly, if you do a monthly SIP of Rs 5,000, then in 5 years you will get Rs 4,12,432. Your investment will be Rs 3 lakh in this and there will be a wealth gain of Rs 1,12,432.
(Disclaimer: Returns are calculated based on a calculation here. This does not constitute investment advice. Investment in Mutual Funds is subject to market risks. Do your own research or consult your advisor before investing.)
