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Should I Go For FD Or SIP?

Updated On Oct 22, 2021

Fixed deposits are investment products. You can invest in fixed deposits for fixed tenures as per your convenience and get attractive returns on your investments at maturity. Normally, banks do not allow you to withdraw your deposits before a given maturity date. But, with prior notification to the bank, you can withdraw your fixed deposits. These deposits allow you to invest for a minimum period of 7 days to a maximum period of 10 years.

SIP or Systematic Investment Plan is a method of investing in mutual funds. You can invest a fixed amount every month in a mutual fund through SIP. The regular investment strategy averages out your purchase price and protects you from inadvertently catching a market peak when you invest. A SIP also gives you more mutual fund units, when the fund price drops.

Difference Between SIP And Fixed Deposit

Let’s take a closer look at the differences:

1. Investment Amount

If we look at the investment type available to potential investors with regard to SIPs and FDs, it is easy to start investing in both financial instruments. However, considering the rates that they offer, it is comparatively easier when it comes to SIPs as one can start with a small amount and yet have a chance to earn higher returns if the companies in which the investments have been made are doing well.

Must Read: What To Expect When Term Insurance Reaches Maturity?

2. Interest Rates

Considering the rates of interest offered in SIPs are higher as compared to that of FDs, it does not guarantee a potential investor of great returns. Hence, when one invests in SIPs, it is up to pure luck when it comes to guaranteed returns. While in the case of FDs, one who invests in it is sure to get higher returns irrespective of the sum he/she has invested in the FD.

3. Taxes

When it comes to the important topic of tax saving, tax is levied on most FDs on the basis of the income tax slab that the investor falls under. Though, all the FDs charge taxes on the individuals, there is one type of FD called tax saving FD where the investors can claim deductions on investments upto Rs. 1.5 Lakh. As in the case of SIPs, though no tax is charged if the mutual funds units are sold after a year, a certain percent of tax is levied on the investors.


Though FDs are the safest option available to investors when it comes to investing the hard money without giving second thought, investing in mutual fund SIPs can also be beneficial if the decision to invest is taken after taking all risks into account. With the interest rates on FDs slashed by banks in recent times, both conservative and assertive investors can do prior research on investing in mutual fund SIPs which can result in higher returns on the investments made.

Also Read: Why PPF Is A Good Investment In 2021?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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