Fixed Deposit (FD) vs Systematic Investment Plan (SIP)

When choosing between a fixed deposit and a systematic investment plan, consider factors like risk, investment period, and returns. FDs are low-risk investments that provide fixed returns for a specific period. They are suitable for those who want stability and capital protection. SIPs involve regularly investing a fixed amount in mutual funds. It allows individuals to invest a small amount of money in mutual funds to build their portfolios. 

 

Each option has features that fit different financial goals and risk levels. Knowing these differences can help you make better financial decisions.

An FD is a savings tool where you deposit a lump sum amount with a bank or Non-banking Financial Company (NBFC). The deposit is for a predetermined period, known as the investment tenure. The interest rate you receive on an FD is fixed and does not change during the tenure. This makes FDs a low-risk investment because the returns are predictable.  

 

Here are some of the benefits you can expect with a fixed deposit:

• The principal amount you invest is safe from market fluctuations

• You can get a loan against your FD and access funds in times of need, without having to break the investment 

• You can choose the tenure based on your needs; this can range from a few days to several years

• Tax-saving FDs offer tax benefits under Section 80C of the Income Tax Act, 1961

An SIP is a method of investing in mutual funds. It allows you to invest a smaller amount of money regularly, either monthly or quarterly. SIPs offer flexibility and allow you to invest in mutual funds in an affordable manner without making lump sum deposits.  

 

Here are some benefits you can receive from an SIP:

• You can start or stop your SIP at any time without any penalties

• Start investing in an SIP with an amount as small as ₹500

• Grow your investment over time through the power of compounding

Before you begin your investment journey, here are some of the key differences you must keep in mind:

This choice depends on your financial goals and risk tolerance. If you seek predictable returns through a one-time lump sum investment, FDs may be a suitable option. However, if you wish to make small, regular investments in market-linked tools, you could opt for SIPs in mutual funds. 

 

FDs may be ideal for short-term financial goals because they provide stable and assured returns. On the other hand, SIPs could be a suitable option for long-term financial goals, such as retirement planning, due to their potential for higher growth.

Begin your investment journey with Bajaj Markets by following these simple steps:

1. Fill in the ‘Invest Now’ application form with your contact number, date of birth, and pin code

2. Enter the OTP sent to your mobile to continue the setup process

3. Compare interest rates from various partner banks and NBFCs

4. Choose a bank or NBFC, select the tenure, and pick an interest payout frequency that suits your needs

5. Enter your full name and PAN card details to verify your CKYC

6. If CKYC records are not available, upload the necessary documents, including your PAN card, Aadhaar card, and a selfie for verification

7. Review and update personal details such as your address, marital status, and email address

8. Enter your banking information, including your bank’s name, IFSC code, and account number

9. Add nominee details to designate a beneficiary for your FD

10. Choose your preferred payment method, either UPI or Net Banking, and complete the transaction

11. After completing these steps, your FD will be successfully booked, and you can start earning interest on your investment

To invest in an SIP, you need an account with a mutual fund company. You can also use a brokerage or an online investment platform. Complete the necessary KYC documentation, which can be taken care of online. 

 

Once this is completed, here are some steps you may have to take to invest in mutual funds via SIP: 

1. Compare different mutual funds and choose one that fits your financial goals, risk appetite, and investment horizon 

2. Decide the amount you are comfortable investing on a regular basis

3. Once you have selected the investment amount, you will need to choose the frequency of your investment (monthly, quarterly, etc.)

4. Authorise the mutual fund company to deduct the SIP amount from your bank account automatically

5. Set the deduction to happen at your chosen frequency with the help of net banking or by submitting a physical mandate form

 

By following these steps, you can start investing in FDs and SIPs with ease and build a diversified portfolio that suits your financial needs.

 

It's a good practice to regularly review your SIP investments. You can do this using the mutual fund company’s website or mobile app. Track the fund’s performance and adjust if required. SIPs offer flexibility with your investments. You can increase, decrease, or stop your contributions at any time without penalties, based on your financial goals.