SIP vs SBI FD: ₹10.5 Lakh Investment — Which One Wins in 10 Years?

February 27, 2025

by karishmabhosale1620@gmail.com

with 104 comments

Financial Update

When it comes to long-term wealth creation, choosing the right investment option is crucial.

Should you invest in a Systematic Investment Plan (SIP) and ride the market waves for higher potential returns?

Or should you opt for a Fixed Deposit (FD) with SBI, ensuring stable, risk-free earnings?

What is a Systematic Investment Plan (SIP)?

A Systematic Investment Plan (SIP) allows investors to invest a fixed amount in mutual funds at regular intervals (monthly, quarterly, etc.).

This investment method promotes disciplined saving and helps manage market volatility through rupee-cost averaging.

How SIPs Work:

Investors choose a mutual fund scheme and commit a fixed periodic investment.
The investment amount is automatically debited from their bank account.
Based on the prevailing Net Asset Value (NAV), the amount is converted into mutual fund units.
Over time, compounding and reinvestment of returns help grow the investment.
Investors can withdraw funds anytime or opt for a lump sum payout at maturity.

SIP Returns on ₹10.5 Lakh Investment Over 10 Years

Monthly Investment: ₹8,750
Total Invested Amount: ₹10,50,000
Estimated Returns: ₹9,10,314
Total Value After 10 Years: ₹19,60,314

Note:

SIP returns are market-linked and may vary based on mutual fund performance.

Over the long term, equity mutual funds have historically provided 12%-15% annual returns.

What is an SBI Fixed Deposit (FD)?

An SBI Fixed Deposit (FD) under the National Savings Time Deposit Scheme offers stable and guaranteed returns over a fixed tenure.

This investment option is ideal for risk-averse investors seeking capital safety and predictable earnings.

Key Features of SBI FD:

Flexible Tenure: Choose from 1, 2, 3, or 5 years with an option to extend.
Minimum Investment: ₹1,000 (No maximum limit).
Interest Payment: Compounded annually and credited to your savings account.
Tax Benefit: 5-year FDs qualify for Section 80C tax deductions (up to ₹1.5 lakh).

SBI FD Returns on ₹10.5 Lakh Investment Over 10 Years

Invested Amount: ₹10,50,000
Estimated Returns: ₹11,57,467
Total Value After 10 Years: ₹22,07,467

Note: SBI FDs offer fixed returns based on current interest rates, which are subject to revision by the bank.

SIP vs SBI FD: Which One Should You Choose?

Factor SIP (Mutual Funds) SBI Fixed Deposit (FD) Returns Potential Higher potential returns (12%-15%) but market-dependent.

Lower, but guaranteed returns (6%-7%).

Risk Level Subject to market fluctuations; returns are not guaranteed.

No risk; returns are fixed and assured. Liquidity Flexible withdrawals anytime without heavy penalties.

Premature withdrawal penalties apply.

Investment Growth Compounding leads to higher long-term wealth creation.

Fixed interest limits long-term growth.

Tax Benefits No direct tax benefits; long-term capital gains tax (LTCG) applies.

5-year FD qualifies for Section 80C tax deduction.

Final Verdict:

Choose SIP if:

You seek higher returns and can tolerate market fluctuations.
You have a long-term horizon (10+ years) for compounding benefits.
You need flexibility and liquidity in your investment.

Choose SBI FD if:
You want guaranteed, stable returns with no risk.
You prefer capital protection over high returns.
You need an investment that qualifies for tax benefits under Section 80C.

Conclusion: SIP vs FD — Which is Better for You?

If you want higher potential returns and are willing to accept some risk, SIPs are the better option for long-term wealth creation.

However, if capital safety and fixed returns are your top priorities, an SBI Fixed Deposit is the safer choice.

Ultimately, a balanced portfolio with both SIPs and FDs can provide growth and stability, ensuring financial security while maximizing returns.

Pro Tip:

Consider diversifying your investments — allocate a portion to SIP for growth and FD for safety, based on your financial goals and risk appetite.