SIP vs FD: Growth With Risk or Certainty That Shrinks?
Written by lemmatools Editorial Team · Last updated: · 6 min read
Two different promises
An FD promises a number: 7% p.a., guaranteed, insured up to ₹5 lakh. An equity SIP promises a process: buy every month, capture the market’s long-term growth (historically 11–13% in India), accept that any given year can be −20%. The FD’s risk is invisible but real — after 30% tax its ~4.9% return trails 5–6% inflation, so long-held FD money loses purchasing power with certainty. The SIP’s risk is visible volatility that has historically faded over long holds.
The numbers by horizon (₹10,000/month)
- 5 years: FD/RD ≈ ₹7.1L vs SIP at 12% ≈ ₹8.2L — but a bad 5-year window can leave the SIP behind. Genuine contest; short-horizon money belongs in deposits.
- 10 years: RD ≈ ₹17.2L vs SIP ≈ ₹23.2L. The gap (₹6L) now dwarfs plausible bad luck.
- 20 years: RD ≈ ₹52L vs SIP ≈ ₹99.9L. Post-tax and post-inflation, the deposit route has roughly stood still while the SIP tripled real wealth.
Run your own amount through the SIP and FD calculators — the divergence compounds, which is why the honest answer depends almost entirely on the date you need the money.
The horizon rule
Under 3 years: deposits, no debate — sequence risk can be brutal. Three to seven years: split by temperament, or use hybrid/debt funds. Beyond seven: equity SIP for the growth money, keeping only the emergency fund in deposits. And if a market crash would make you stop the SIP, budget for that honestly — the historical SIP returns quoted everywhere belong only to those who kept buying through the crashes.
This article is for general information only and is not tax, legal or investment advice. Rules and limits change with Finance Acts and notifications — verify against the official sources above or consult a qualified professional before acting.