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Mutual Fund vs SIP vs FD Differences you should know

Mutual Fund vs SIP vs FD Differences you should know

Mutual Fund vs SIP vs FD Differences you should know

A Fixed Deposit (FD) provides interest-based returns on the amount deposited, while a Mutual Fund (MF) provides returns on the amount invested. Depending on your financial goals, you can decide if a Mutual Fund, Systematic Investment Plan or a Fixed deposit is the right choice.

Each investment scheme has its benefits. While a SIP or Mutual fund may give you more interest, an FD is a more secure option that offers assured returns. Making an informed decision requires a lot of research, which we have done for you - read more to know which investment scheme will suit your needs best.

What is a Mutual Fund?

In simple terms, a Mutual Fund is a fund that pools money from individual investors and reinvests this accumulated fund in various companies. The returns get distributed among all those who invested according to their contribution. Here are some benefits of a mutual fund that you should consider:

  • A mutual fund is a long-term scheme that benefits your future goals.
  • The lock-in period for a Mutual Fund depends on your chosen scheme, but you may exit when you wish to.
  • Any gains you make before the year-end are taxed under short-term capital gains tax.
  • Mutual funds have a more comprehensive classification of funds to cater to the unique requirements of those looking to invest.

What is a Systematic Investment Plan (SIP)?

A Structured Investment Plan (SIP) is an investment that allows you to make monthly deposits of small amounts of money. SIPs could be a stepping stone for new investors to invest in mutual funds. SIPs can also be long-term investments. People can invest whenever it is convenient for them. Here are some benefits you will get along with a SIP account:

  • It is simple to start SIP, and a bonus feature is that you can track how the assets are performing at your convenience.
  • SIPs eliminate the need for investors to monitor interest rates because you make investments regularly.
  • Tax benefits are another great benefit offered by SIPs. People who invest in SIPs for more than a year can enjoy tax benefits.
  • Money can be invested and withdrawn at any time as SIPs are in open-ended funds.

What is a Fixed Deposit (FD)?

A fixed deposit, or an FD, is a type of investment that allows consumers to deposit a single sum of money for a certain period. This service is provided by banks and Non-Banking Financial Companies (NBFCs). You can only break the FD during its term under certain conditions. You will have to pay some fees to the bank/NBFC if you want to do so.

Shriram Finance Limited (SFL) offers higher interest rates on an FD, ensuring you can achieve your future goals. Here are some benefits of opening a fixed deposit:

  • A fixed deposit investment is risk-free as the interest rates are independent of market fluctuations.
  • It offers flexibility to the people investing as they can select the amount and period they want to support.
  • You can avail of loans based on the amount and term of the fixed deposit.
  • Upon completion of the FD tenure, the entire amount invested, plus interest will get deposited into the person's account.

Differences between a Mutual Fund, SIP and an FD

ParametersMutual FundSIPFD
ReturnsNo assured returnsNo assured returnsReturns are guaranteed but depend on the interest rate prevailing from time to time
Mode of investmentPeriodicalIn instalmentsLump-sum
TenureMin tenure: 1 day 
Max tenure: limitless
Min tenure: 1 day 
Max tenure: 3 to 5 years
Min tenure: 7 days 
Max tenure: limitless

Which type of investment scheme should you invest in?

Considering all the benefits and risks, investing in a fixed deposit is always the safest option. You can always use an FD calculator to check the exact interest rate you can get for the amount you want to deposit. SFL's fixed deposits come with an "IND AA+/Stable" by Indian Rating and Research, indicating high safety.

A mutual fund and SIP can offer you faster growth than an FD but is also risky as it is subjected to market fluctuations. You can choose the risk according to your suitability. An FD is much more stable and can offer guaranteed returns on your investments. The returns of an FD are not much and may lose value due to inflation.


The final decision rests with you and your financial goals. Now that you know the differences between a mutual fund, SIP and an FD, you can make the right decision after considering all factors. Invest in a secure fixed deposit with Shriram Finance to get assured returns on your investments. You can check the interest rates according to the type of investment you want to make.

Key highlights:

  • Mutual fund and SIP investments offer higher returns on your investments.
  • Investing in a fixed deposit is risk-free
  • You can use an FD calculator to find the exact interest rates for a deposit of your preference
  • You can withdraw money from a SIP at any given time after investing.
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