FD, RD, or SIP: Match Product to Goal
FD (lump sum), RD (monthly fixed), and SIP (monthly in mutual funds) serve different needs. FD and RD are fixed-income, low-risk, guaranteed. SIP is equity-linked, higher risk, higher return potential over the long term. This guide compares FD vs RD vs SIP: risk, return, liquidity, tax, and which to choose for emergency fund, short-term goals, and long-term wealth. All content is focused on this comparison.
Key Takeaways
- FD: Lump sum, guaranteed, 6–7%. Emergency fund, short-term, capital safety
- RD: Monthly fixed, guaranteed, ~same as FD. Salaried, no lump sum, discipline
- SIP: Monthly in equity/debt funds, market-linked. Long-term wealth, inflation-beating
- Short term (1–3 years): FD/RD. Long term (10+ years): SIP (equity) + some FD/RD for safety
- Hybrid: Use all three: FD for emergency, RD for goal, SIP for retirement
FD: Stability and Safety
- What: Lump sum with bank for fixed tenure. Guaranteed interest.
- Return: 6–7.5% (varies by tenure, bank). Predictable.
- Risk: Very low. Principal safe (DICGC cover ₹5L). Inflation may erode real returns over long term.
- Liquidity: Premature withdrawal with penalty. Loan against FD available.
- Best for: Emergency fund, short-term goal (1–3 years), capital preservation, retirees needing income.
RD: Disciplined Monthly Savings
- What: Fixed monthly deposit. Same rate as FD for that tenure.
- Return: Similar to FD. Slightly lower maturity for same total invested (money deployed gradually).
- Risk: Very low. Same safety as FD.
- Liquidity: Premature closure with penalty. Less flexible than FD for partial withdrawal.
- Best for: Salaried, no lump sum, goal-based saving (trip, gadget, down payment), building habit.
SIP: Long-Term Wealth Creation
- What: Fixed amount monthly in mutual fund. Market-linked.
- Return: Variable. Equity 10–12% long-term (historical). Debt 6–8%. Not guaranteed.
- Risk: Medium to high (equity). Short-term volatility. Long-term (10+ years) has historically worked.
- Liquidity: Redeem anytime (units sold at NAV). No penalty, but market risk means possible loss if redeemed in downturn.
- Best for: Retirement, child's education (10+ years), wealth creation, beating inflation.
Side-by-Side Comparison
📊 FD vs RD vs SIP
Decision Framework
- Emergency fund (6–12 months expense): FD or short-tenure FD. Safety and quick access.
- Short-term goal (1–3 years): FD if lump sum, RD if monthly. Avoid equity SIP for such short tenure.
- Medium-term (3–7 years): Hybrid. Part FD/RD, part SIP in hybrid/debt. Or more equity if you can tolerate volatility.
- Long-term (10+ years): SIP in equity-heavy funds. Add FD/RD for stability. SIP benefits from compounding and time.
Balanced Portfolio Example
Emergency: 6 months expense in FD. Short-term goal (vacation in 2 years): RD. Retirement (25 years away): SIP in equity funds. Tax saving: ELSS SIP (80C) or 5-year tax-saving FD. This way you get safety, discipline, and growth. Don't put all in one product.
Use Our Calculators
FD Calculator, RD Calculator, SIP Calculator. Compare maturity and returns for your amount and tenure. Plan allocation based on goal and risk.
Disclaimer
SIP in mutual funds is subject to market risk. Past performance doesn't guarantee future returns. Read offer document before investing.