Fixed Deposit vs SIP - Which is Better

Fixed Deposits provide safety with fixed interest, while SIPs allow regular investments. Compare SIP vs Fixed Deposit to determine the best financial option.
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SIP vs FD
OPEN FD
3 mins
18-March-2025

Fixed Deposits (FDs) require a lump-sum investment and offer a fixed interest rate over a specific term. They are generally considered safer, providing guaranteed returns. In contrast, Systematic Investment Plans (SIPs) involve regular, smaller investments, typically in equity funds. While SIPs offer the potential for higher returns over the long term, they come with inherent market risks. If you are confused about whether is SIP better than FD, here you will clarify some concepts.

Difference between Fixed Deposit vs SIP

Here is a table showing differences between Fixed deposit vs SIPs-

Particular

FD

SIP

Investment amount

A lump sum of money at one time

Fixed amount at regular intervals

Interest rate

Not subject to market fluctuations

Depends on market movements

Liquidity

Less flexible as funds are locked-in

More flexible as liquidity is high

Tenure

Suitable for all investment goals

Suitable for mid-term to long-term investment goals

Risk involved

Zero to no risk involved

Mid to high risk depending on chosen funds

 

What is a Fixed Deposit - FD?

A Fixed Deposit is a widely invested-in tool that safely parks your funds for a fixed tenure at a fixed income rate. Banks, post offices and Non-Banking Financial Companies offer FD. The risk involved with FDs is practically zero as these do not get affected by market dynamics and are mostly government-backed and under the tight scrutiny of the RBI. Since it is a fixed-income instrument, you can know exactly how much you would make of your investment at maturity. Bajaj Finance is one such financier that offers the highest safety of funds as well as handsome returns. You can also opt for a non-cumulative payout where you get returns periodically.

Pro tip

Bajaj Finance launches a new variant, "FD Max", for investments upto Rs. 25,000 . Bajaj Finance is providing one of the highest interest rates of up to 8.60% p.a.for senior citizens and 8.35% p.a. for non-senior citizens , in this variant.

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Benefits of FD (Bajaj Finance Fixed Deposit)

1. Safe investment option for risk-averse investors

Bajaj Finance online Fixed Deposit has been credited with the highest safety ratings of (AAA) and (AAA) by CRISIL and ICRA respectively. These are the leading credit rating agencies in India.

2. High FD interest rates

Bajaj Finance offers fixed deposit interest rates up to 8.35% p.a. for citizens aged below 60 and for senior citizens, the rates can go up to 8.60% p.a. as they get an additional rate benefit of up to 0.40% p.a. on their deposits.

3. Loan against FD facility

Bajaj Finance FD offers a loan against the FD facility. You can easily get a loan of up to 75% of your FD value.

What is a Systematic Investment Plan?

SIP or Systematic Investment Plan is a method of investing in mutual funds systematically. It is an investment plan where an individual invests a fixed amount of money at regular intervals of time, typically monthly, into a mutual fund scheme. It is a simple and disciplined investment approach that helps individuals invest regularly in mutual funds and build wealth over the long term.

The best time to start investing in SIP is as early as possible. The earlier an individual starts investing, the more time their money will have to grow. Moreover, investing in SIP helps to create a habit of disciplined saving and investing, which is essential for long-term wealth creation.

Benefits of SIPs

Disciplined saving and investing - SIP helps to create a habit of disciplined saving and investing, which is essential for long-term wealth creation.
Risk mitigation - SIP helps to mitigate the risk of market volatility by investing regularly at different price points.
Power of compounding - SIP allows investors to take advantage of the power of compounding, which helps to generate higher returns at maturity.
Easy to start and manage - SIP is a simple and easy investment plan that can be started and managed online.

SIP vs FD - Which is a better option for investment?

In conclusion, choosing between SIPs and FDs should ideally depend on personal financial goals, risk appetite, and income. If you have a lump sum kept aside and growing wealth steadily is your aim, then, FD may be the right choice for you. However, if you are willing to take some risk and require more liquidity in hand, SIPs are ideal.

FD is one such safe and reliable investment option that only will preserve your capital but also provide handsome returns. With a return rate going up to 8.60% p.a. you can grow your wealth easily with Bajaj Finance.

Calculate FD returns through our fixed deposit interest calculator.

Calculate your expected investment returns with the help of our investment calculators

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Conclusion

The choice between FDs and SIPs depends on your individual financial goals and risk tolerance.

FDs are suitable for those seeking stability and guaranteed returns, while SIPs offer the potential for higher growth over the long term, albeit with inherent market risks.

Ultimately, the best investment option depends on your individual circumstances and investment objectives.

Frequently asked questions

Is it safe to invest through SIPs?

Yes, investing through SIPs is very safe. You must make sure to go through a reputed financier that helps invest in these mutual fund schemes and conducts research before investing. Bajaj Finance offers mutual fund facilities where you can choose from 900+ options.

Are investments done via SIP tax-free?

No, SIP investments are taxable.

Is SIP better than FD?

Both tools have their own merits and advantages. However, to choose which one suits your requirements best you must be clear about your goals, risk appetite, income, and investment horizon to make a well-informed decision.

Can I cancel my SIP anytime?

Yes, SIPs can be paused or even cancelled anytime.

Can I withdraw my investment via SIP anytime?

Withdrawal from your SIP investment anytime is easy. However, it is best to check premature withdrawal penalties that some providers might charge before making a move.

What is the Digital FD offered by Bajaj Finance?

Bajaj Finance has launched a new FD type called "Bajaj Finance Digital FD" for a period of 42 months. Bajaj Finance is providing one of the highest interest rates of up to 8.60% p.a. for senior citizens and for the customers below the age of 60 they are providing up to 8.35% p.a. The Digital FD can be booked and managed only through the Bajaj Finserv website or app.

Is SIP safe than FD?

No, SIPs are generally considered less safe than FDs. FDs offer guaranteed returns with minimal risk, while SIPs, particularly those invested in equity funds, are subject to market fluctuations and carry the potential for capital loss.

Is SIP better than FD?

The best choice between FDs and SIPs depends on your individual circumstances. Consider your financial goals, risk tolerance, income, and investment horizon to make an informed decision.

  • SIPs offer potential for higher long-term growth but involve market risk.
  • FDs provide guaranteed returns with lower risk but typically yield lower returns over the long term compared to equity investments.

Does SIP give better returns?

Systematic Investment Plans (SIP) in mutual funds have the potential to deliver higher returns compared to traditional fixed-income instruments like FDs. Since SIPs invest in market-linked securities, they benefit from compounding and rupee cost averaging. However, returns are subject to market fluctuations, and long-term investments generally yield better results.

Is it better to invest in SIP or FD?

The choice between SIP and FD depends on your financial goals and risk tolerance. FDs offer fixed, guaranteed returns, making them ideal for conservative investors. SIPs provide higher growth potential but come with market risks. If stability is a priority, FDs are better; if long-term wealth creation is the goal, SIPs may be more suitable.

Which option is better for senior citizens: SIP or FD?

Senior citizens FDs are generally a safer choice as they provide guaranteed returns and capital protection. SIPs may offer higher returns but involve market risk, which may not suit retirees seeking financial security. However, those with a higher risk appetite can allocate a portion to SIPs for potential long-term growth while keeping FDs for stability.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.