Some investors like to invest in schemes with guaranteed returns, while some investors want maximum profit. For this, even if they have to take a little risk, they don't mind. For such two types of investors, there are two types of schemes, SIP and RD. Know the advantages and disadvantages of both.

Nowadays, there are many types of options available in terms of investment. However, some investors like to invest in schemes with guaranteed returns, while some investors want maximum profit. For this, even if they have to take a little risk, they don't mind. For such two types of investors, there are two types of schemes, SIP and RD. In both schemes, a fixed amount has to be deposited every month. The difference is that RD is a scheme with guaranteed returns, while SIP is a market-linked scheme and there is no guarantee of return in it. However, the returns of SIP are sometimes quite good. If you are confused about investing in these schemes, then understand the pros and cons of both of them well, and after that decide where to invest.

What is a Recurring Deposit

A recurring deposit is like a piggy bank, in which you deposit a fixed amount every month. You get the option of RD at both post office and bank. You save money under the pretext of RD and get a guaranteed amount with interest on its maturity. Investment in RD can be started from Rs 100, while there is no limit on maximum investment. In this case, financial expert Shikha Chaturvedi says that usually the return of RD is less than the inflation rate. But still, due to being a safe investment, many people consider it a better way of saving and investment. Most people save money through RD and earn interest on it and then convert the lump sum amount collected through RD into FD. This secures their lump sum money and a fixed interest is paid on it annually.

What is SIP

SIP is a way of investing in mutual funds. In this too, you invest a fixed amount every month. In this, you can start investing with Rs 500, while there is no limit on maximum investment. But in mutual funds, your money is invested in many types of equity shares and bonds etc. This investment depends on market risks. However, it is considered a profitable deal in today's time because the money invested in mutual funds is managed by the fund manager. Due to this, the risk is reduced significantly and good returns are obtained as compared to traditional investment. This is the reason why SIP is becoming increasingly popular.

Difference between RD and FD

- SIP is considered to give more flexibility than RD. In this, you can invest daily, weekly, and monthly, but you do not get this facility in RD. In this, you have to invest every month.

- There is no lock-in obligation in mutual fund SIP. You can withdraw your deposit amount anytime. But there is a lock-in period obligation in RD. If you withdraw this amount before time, then you may have to pay a penalty for it. You can withdraw its amount only after the tenure of RD is completed i.e. when it matures.

- RD investment is considered safe and it gives guaranteed returns. But in SIP your money is invested in the stock market. There is a risk in it. However, this money is invested in different places. This reduces the risk considerably. Although the return is not guaranteed in SIP, it is considered better than other schemes in terms of returns.