SIP vs FD- Which is Better?
SIPs and FDs are two popular investment options with different
Read more
SIP Plan Benefits
Start SIP with as low as ₹1000
No hidden charges
Save upto ₹46,800 in Taxunder section 80C^
Zero LTCG Tax¶
Disciplined & worry-free investing
Let's discuss the features of both in detail.
Difference Between SIP and Fixed Deposit
SIP and Fixed Deposit are both ways to save and invest money, but they differ in many ways. Let us learn the key difference between SIP and Fixed Deposit from the table mentioned below:
| Feature |
Systematic Investment Plan (SIP) |
Fixed Deposit (FD) |
| Nature of Investment |
A method of investing a fixed amount periodically (e.g., monthly) into a mutual fund scheme. |
A one-time lump-sum deposit made to a bank or financial institution. |
| Underlying Asset |
Market-linked securities (e.g., Equity, Debt, Hybrid funds). |
Fixed-income instrument (Bank/NBFC deposit). |
| Risk Level |
Medium to High |
Very Low |
| Returns |
Market-linked |
Fixed and Guaranteed interest rate, decided at the time of deposit. |
| Investment Style |
Discipline and Rupee Cost Averaging (buying more units when the market is down, averaging out the cost). |
Capital preservation and predictable income. |
| Investment Amount |
Can start with a small amount (as low as ₹100 or ₹500/month). |
Requires a lump sum amount to be deposited upfront (minimum usually ₹1,000 or more). |
| Liquidity |
High (Units in most open-ended funds can be redeemed anytime, though an exit load may apply for early withdrawal). |
Limited/Low (Funds are locked in for a fixed tenure; premature withdrawal usually results in an interest penalty). |
| Taxation |
More Tax-Efficient for equity funds (e.g., Long-Term Capital Gains are taxed at 10% on gains over ₹1 lakh/year). |
Less Tax-Efficient (The interest earned is added to your total income and taxed according to your income tax slab). |
| Ideal For |
Long-term financial goals (e.g., retirement, child's education), wealth creation, and investors with a moderate-to-high risk appetite. |
Short-term goals, emergency funds, capital preservation, and investors with a low-risk appetite (e.g., conservative investors, retirees). |
- Insurance Companies
- Mutual Funds
|
Returns |
| Fund Name |
5 Years |
7 Years |
10 Years |
| SBI Life |
13.82% |
13.34% |
|
| HDFC Life |
20.53% |
16.08% |
|
| Axis Max Life |
26.3% |
22.2% |
|
| ICICI Prudential Life |
16.7% |
14.89% |
|
| Tata AIA Life |
21.87% |
22.18% |
|
| Bajaj Life |
17.52% |
14.5% |
|
| Birla Sun Life |
19.43% |
16.41% |
|
| PNB MetLife |
31.41% |
24.68% |
|
| Canara HSBC Life |
12.97% |
11.89% |
|
| Star Union Dai-ichi Life |
15.2% |
- |
|
Fund rating powered by
Last updated: Nov 2025
What is SIP?
An SIP, or Systematic Investment Plan, is a way to invest money in market-linked/mutual funds regularly. Instead of putting in a lump sum, you invest a fixed amount at regular intervals, like monthly or quarterly.
The best SIP plan in India offers the benefits like disciplined investing, rupee cost averaging, and the power of compounding over time. You can estimate your returns from your mutual fund in India through SIP by using an online SIP Calculator.
What is an FD?
A Fixed Deposit (FD) is a type of investment option offered by banks where you deposit a certain amount of money for a fixed period. In return, the bank pays you a fixed FD interest rate on your deposit, which is usually higher than a regular savings account.
An FD is considered a safe investment option because it offers guaranteed returns and is protected by the government up to a certain limit. However, you cannot withdraw your money before the fixed period ends without incurring a penalty.
You can use an FD Calculator to estimate your interest earned as per the predetermined FD interest rates.
Which is Better: SIP vs FD
The "better" option depends entirely on your goals and risk tolerance:
| Option |
Best For |
Key Feature |
Risk Level |
| FD |
Short-term goals (1-3 years), emergency funds, and conservative investors. |
Guaranteed, fixed returns. Capital is safe. |
Very Low |
| SIP |
Long-term wealth creation (5+ years) and investors seeking higher growth. |
Market-linked, potential for higher, inflation-beating returns. |
Moderate to High |
SIP Calculator
Monthly Investment
₹22.4 L
Top Funds with High Returns (Past 7 Years)
13.24%
Equity Pension
15.49%
Global Equity Index Funds Strategy
19.07%
High Growth Fund
13.44%
Opportunities Fund
21.15%
Multi Cap Fund
14.53%
Accelerator Mid-Cap Fund II
15.89%
Multiplier
14.92%
Frontline Equity Fund
18.41%
Pension Mid Cap Fund
11.57%
Growth Plus Fund
14.8%
US Equity Fund
15.31%
Growth Opportunities Plus Fund
11.95%
Equity Top 250 Fund
14.36%
Future Apex Fund
12.28%
Pension Dynamic Equity Fund
14.68%
Pension Enhanced Equity
Benefits of Investment Diversification
Diversification is a cornerstone concept in investing, and for good reason. It offers a number of advantages to investors:
- Minimizes Risk: Diversification spreads investment plans across different assets, reducing the impact of a single investment's poor performance.
- Enhanced Returns: By investing in various assets, you have the opportunity to benefit from the growth of different sectors or markets.
- Smoothes Out Volatility: Diversification can help cushion the impact of market fluctuations on your overall portfolio.
- Provides Opportunity for Growth: Investing in diverse assets allows you to tap into various opportunities that may arise in different sectors or regions.
- Increases Flexibility: Diversification gives you the flexibility to adjust your portfolio according to changing market conditions or investment goals.
Sum It Up
The choice between SIP and FD isn't about which is "better," but which aligns with your financial goals and risk appetite. FDs guarantee capital safety and fixed returns, making them ideal for short-term needs or risk-averse investors. SIPs, however, offer the potential for higher, inflation-beating growth over the long run, compensating for market risk. For many, a balanced portfolio using both is the smartest strategy.
FAQs
-
Is SIP better than FD?
The suitability of SIP (Systematic Investment Plan) vs. FD (Fixed Deposit) depends on your financial goals and risk tolerance. SIP is generally considered better for long-term wealth creation due to potential higher returns from investing in mutual funds, but it comes with market risk. FD, on the other hand, offers guaranteed returns but tends to have lower returns compared to equity investments over the long term.
-
Which is better, mutual fund or FD?
The right investment plan between a mutual fund scheme and an FD depends on your financial objectives and risk appetite. Mutual funds offer diversification across various asset classes and potentially higher returns, but they come with market risk. FDs provide safety and guaranteed returns but typically offer lower returns compared to mutual funds, especially over a longer investment horizon.
-
Does SIP give better returns?
SIP can potentially provide better returns compared to traditional investment options like FDs over the long term. By investing regularly over time, SIP allows investors to benefit from the power of compounding and rupee cost averaging. However, returns from SIPs are subject to market fluctuations and may vary based on the performance of the underlying mutual fund scheme.
-
Which is best: RD, FD or SIP?
The best option among RD (Recurring Deposit), FD, and SIP depends on your financial goals, time horizon, and risk tolerance. RD and FD are suitable for investors seeking safety and guaranteed returns, while SIP is preferable for those willing to take on market risk in exchange for potentially higher returns over the long term. It's essential to assess your financial situation and consult with a financial advisor to determine the most suitable investment option for you.
