Systematic Deposit Plan vs SIP: A comparison of two investment options

Let us look at two most popular investment options in the market and understand how they work.
Systematic Deposit Plan
3 mins
01 April 2024

Systematic Deposit Plans (SDP) and Systematic Investment Plans (SIP) are two of the most popular investment options in India. While SDP is a fixed deposit investment option, SIP is a mutual fund investment option. In this article, we'll explore the difference between SDP and SIP in terms of investment objectives, risk, returns, flexibility, and liquidity to help investors make the right investment decision.

Difference between SDP and SIP

1. Initial investment goals: SDP seeks to preserve capital while offering investors excellent liquidity. In fact, the Bajaj Finance SDP provides the convenience of regular savings with assured returns. SIP, on the other hand, aims to produce long-term capital growth through the purchase of a diverse portfolio of stocks or bonds.

2. Taxation: Fixed deposit interest received through SDP is regarded as taxable income. The investor's overall income is increased by the interest income, which is then taxed according to their applicable income tax bracket. The taxation of SIP investments in mutual funds is based on the type of mutual fund and the holding period.

3. Liquidity: SDP offers high liquidity, allowing investors to withdraw the invested money within a few hours of it being made available. Bajaj Finance SDP also comes with one of the highest [ICRA]AAA(Stable) and CRISIL AAA/STABLE ratings that ensures the safety of your deposit, making it one of the most flexible yet safe investment option. SIP, however, is not as liquid as SDP and requires a certain lock-in period before investors can redeem their units and withdraw their investment.

In conclusion, SDP and SIP are two different investment options catering to different investment requirements of investors. While SDP provides a fixed and guaranteed return on investment while providing the flexibility of time and liquidity, SIP is a comparatively high-risk, high-return investment option that provides long-term capital appreciation. Based on the investment goals, risk appetite, and financial situation, investors can choose the right investment option and build a diversified investment portfolio.


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