WHAT TO CHOOSE SYSTEMATIC INVESTMENT PLAN (SIP) OR RECURRING DEPOSIT (RD)
There are so many investment plans? So much investment rates? Where to invest and where not to invest? Which one is safe and which one is not? Everybody has so many future plans and everybody thinks of investing at one point of time but have so many questions in their mind going on.
There are two types of investment which are best for systematical monthly investment i.e. Systematic investment plan or recurring deposit which can be either invested in banks or post offices due to which now you don’t have to worry about any of your future plans But here the question arises from these what to invest in. Here are several pros and cons through which you can decide what to invest in:
Under Systematic investment plan (SIP), person invests in mutual funds. Here the rate of interest usually varies between 7% and 8% and for senior citizen, the rate of interest also increases. The deposits can be deposited either in banks or post offices. Here the rate of interest can be calculated through recurring deposit calculator. Under this one can invest as low as rupees 500 or in higher multiples of 100 on a monthly or quarterly basis for as much as you want.
But under recurring deposit (RD) a person is suppose to invest a fixed of deposit either every month or quarterly for a fixed period of minimum six months which can the extended for three- three months and the maximum tenure which can be extended to ten years.
Rate of interest: Under recurring deposit, there is a fixed rate of interest but under Systematic investment plan, a person has to choose between debt and equity.
Risk: Under Recurring deposit, the level of risk is very limited but under Systematic investment plan, it is on the basis of stock market. Here the certainty level is less.
Liquidity: Both are liquid investment but under recurring deposit there are so many formalities which are suppose to be done, there are many charges which are suppose to be paid if you withdraw it earlier.
Taxation: Exemption of taxes is granted under Systematic investment plan but under recurring deposit, there is no such exemption, the money earned out of recurring deposit has to undergo taxation.
Installment frequency: Under recurring deposit, there is monthly installment which is to be paid and under Systematic installment plan there can be flexible installments which can be paid on daily, weekly or monthly basis according to the depositors wish.
Return: Under Systematic investment, there is nothing fixed about return, it is more profitable for long term plan but under recurring deposit the return is fixed that it the deposit and the interest.
Investment Goal: Systematic investment plan is good for both long term and short-term investment but the recurring deposit is good only for short-term investment.