SIP vs FD: Which is Best in 2025? Advantages You Should Know

What is SIP vs FD?

A Fixed Deposit (FD) is a bank product offering fixed interest, while a SIP is a way of investing small amounts into mutual funds regularly. Both serve different financial goals.

Advantages of SIP over FD

• Higher Returns: While FDs give 5–7% annually, equity SIPs historically deliver 10–15% over the long term.
• Inflation Protection: FD returns often fail to beat inflation, while SIPs in equity funds have better growth potential.
• Flexibility: SIPs allow you to start with as little as ₹500 and increase with step-up options, unlike FDs which require lump sums.
• Tax Efficiency: Equity SIPs held for long term attract favorable tax rules vs interest on FDs which is fully taxable.

Which is Best: SIP or FD?

If your goal is short-term safety, FDs work. But for wealth creation, SIP is the clear winner. Always align with your risk appetite and timeline.