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Both RD and SIP offer growth, but returns differ over five years. Here’s a clear breakdown of the total amount one could accumulate and which may be more beneficial
Both options can effectively grow savings, depending on the investor’s risk tolerance and financial goals. (Representative/Shutterstock)
While many know how to earn money, only a few understand how to invest it wisely. For those aiming to accumulate lakhs by saving Rs 5,000 monthly, options like Post Office Recurring Deposit (RD) and Systematic Investment Plan (SIP) are available. Both methods offer potential growth, though their returns may differ over a five-year period.
Here’s a simple breakdown of how much money could be accumulated after five years and which option might prove more beneficial.
Investing Rs 5,000 In Post Office RD Scheme
The Post Office RD scheme is a safe investment option backed by government guarantees, providing assured returns. Currently, RD offers an interest rate of 6.7% per annum, compounded quarterly. If one invests Rs 5000 monthly in an RD for five years, the total investment will be Rs 3.5 lakh. With the given interest rate, the total amount after five years would be Rs 3,56,830. This scheme is ideal for those seeking low-risk investments with guaranteed returns.
Rs 5,000 Monthly In SIP Can Grow Into This Much Fund
SIP is a method of investing in mutual funds and is linked to market performance. While SIP does not offer guaranteed returns, it has the potential for higher profits in the long term. Experts estimate the average annual return for SIP to be around 12%. Investing Rs 5000 monthly in SIP for five years would amount to Rs 3 lakh. Assuming a 12% return rate, the interest earned would be approximately Rs 1,05,518, making the total amount Rs 4,05,518. The returns may increase if the market performs well but could also decrease due to market fluctuations.
Key Difference Between RD And SIP
The primary difference between RD and SIP lies in risk and return. RD ensures the safety of funds with guaranteed returns, while SIP involves market risks but can yield higher profits through compounding.
For instance, with a 12% return, SIP can generate around Rs 48,688 more than RD over five years. Investors willing to take risks for potentially higher returns might find SIP more appealing. However, those preferring secure, fixed returns should consider RD.
Understanding mutual fund schemes and market conditions is crucial before investing in SIP. On the other hand, RD offers a straightforward, safe investment process. Both options can effectively grow savings, depending on the investor’s risk tolerance and financial goals.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
September 10, 2025, 18:23 IST
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